What Is Commercial Umbrella Insurance?


If you own a business, you probably own some form of general liability insurance to protect you in the event of a lawsuit due to negligence on your part. However, there may be situations where the limits of your general policy may not provide adequate protection. A commercial umbrella can provide you and your business with additional liability protection.


A commercial umbrella policy will provide liability limits in excess of those on your general liability policy. This provides you and your business with additional protection in the event of a catastrophic event that results in hundreds of thousands, or even millions of dollars being awarded to plaintiffs in a lawsuit as a result of your negligent act.


Commercial umbrella policy coverage types and amounts will vary depending on the issuing company. According to the Financial Web website, there are certain coverages that you should have on your policy, such as personal injury, contractual liability and extension of coverage to business partners. Also, if you feel you may be susceptible to theft or accident and that your general liability policy may not provide adequate coverage, an umbrella may also be beneficial.


To qualify for a commercial umbrella, the insurance company will require that your general policy has limits at a specific threshold. For example, a company may mandate that the limits of your underlying policy be $500,000. If your limits are only $300,000, you will have to seek approval from your insurer to raise them to $500,000. If you have had a history of claims, your company may not be willing to raise your limits.


Commercial umbrella policies can be a good value because they provide much additional insurance protection for a relatively small premium. This is because umbrellas are considered secondary coverage, meaning that your primary policy's limits must first be exhausted before coverage takes effect. According to Work.com, you can expect to pay between five and eight percent of the premium cost of your underlying policy for umbrella coverage.


You will need to furnish information to your prospective umbrella insurer about the particulars of your business. These include the nature of your business, the types of companies you do business with and possibly financial information such as assets and liabilities. Businesses that are offer a high risk of liability may not be eligible for umbrella coverage.

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