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Business owner with Commercial Umbrella Insurance

Understanding Commercial Umbrella Insurance

    3 minute read

    What’s Commercial Umbrella Insurance?

    Commercial Umbrella Insurance covers the costs that remain after the limits of your primary liability policies have been exceeded. It is not a stand-alone policy. A Commercial Umbrella policy serves as a supplement to underlying policies like General Liability, Commercial Auto, Workers Compensation, and Professional Liability.

    A Commercial Umbrella Policy can be purchased from a different insurance company than the underlying policies. However, it’s usually best that you get your policies from the same insurer. This will be convenient in terms of communication, payments, and claims process.

    What Does Commercial Umbrella Insurance Cover?

    As mentioned above, Commercial Umbrella is an added layer of protection that sits on top of your other Business Insurance policies. It is important to know that this type of Umbrella Insurance is not a catch-all policy. Meaning, Commercial Umbrella Insurance will not automatically cover everything that your primary policies won’t. Therefore, the appropriate underlying policies must be in place. The type of loss/claim also plays a role in what is and isn’t covered.

    In the case that the aggregate limits of the underlying policy (General Liability, for example) have been exhausted for that policy term, Commercial Umbrella will not kick in to cover new claims.

    The details of what’s covered will vary by insurance carrier. Most commonly, Commercial Umbrella Insurance covers you in cases of liability, legal fees, and even other incurred costs. At times, an umbrella policy will be much less restrictive than the primary underlying policy. In the case where a loss is excluded by the primary policy but not by Commercial Umbrella, the umbrella policy may cover the loss from the start without depending on the limits of the underlying policy. However, a deductible may still be required in such a case.

    What Are Some Examples of Commercial Umbrella Insurance?


    Delivery Incident:

    Your driver is delivering machinery to your customer. Unfamiliar with your customer’s warehouse, the driver accidentally damages very expensive equipment and an employee suffers bodily injury. As a result, your company is now liable for $1.2 million in damages, which exceed your primary coverage’s limits. Your umbrella policy which adds another million dollars of protection covers the excess $200,000 you’re responsible for.

    Highway Incident:


    You own a very profitable landscaping company. On the way to a job site, a strap securing equipment on your truck fails and causes a major accident on the highway that involves multiple vehicles and passengers. The cost of material loss, multiple medical claims, and lawyer fees reach $2.7 million. Your $5 million-dollar Commercial Umbrella Policy covers the excess which you would have otherwise been responsible to pay out of pocket.


    Restaurant Accident:

    You’re celebrating your restaurant’s 3-year anniversary. A customer trips over a cable used for decorative lighting and sadly injures their head and suffers long-lasting consequences. Your business is now liable for medical costs, pain and suffering, and other fees. Your Commercial Umbrella policy will pick up the excess cost that otherwise would have been your responsibility to pay.

    Is Commercial Umbrella Insurance Expensive?

    Your cost for a Commercial Umbrella policy will depend on a number of factors but generally, the premium will be cheaper than that of the primary policy. Rates for an umbrella policy depend on factors unique to your business. Such factors include the type of business, size, revenue, amount of underlying coverage, and other matters of liability.

    If you’re considering increasing your level of protection, know that adding Commercial Umbrella may be cheaper than increasing the limits on your primary policy. However, if you already have relatively high coverage on your primary policies, your umbrella policy may be even less expensive.

    Where Do I Find Good Commercial Umbrella Insurance?

    There are many insurance companies that offer Commercial Umbrella Insurance. You’ll want to talk to a licensed Business Insurance agent. Preferably one that has access to various highly trusted companies and can compare coverage and rates for you, like the ones available through AIS Insurance.

    The information in this article is obtained from various sources. This content is offered for educational purposes only. It should not replace the advice of a qualified professional. The definitions, terms and coverage in a given policy may be different than those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.