Commercial Umbrella Insurance: What it is & What it Covers

Insurance policies serve the same purpose: they provide compensation in case of financial loss. As a business owner, purchasing insurance coverage is something you should not neglect. No matter how carefully you run your business, accidents may happen. Insurance premiums can be costly, but the out-of-pocket expenses you will incur from lawsuits can cost even more. It can also put your business at serious risk. Aside from having general liability insurance, employer’s liability insurance, and commercial auto liability insurance, it would be best if you also thought about adding commercial umbrella insurance. When the need arises, you will be glad you made the right decision.

What is commercial umbrella insurance, and how does it work?

Umbrella insurance supplements your business policy limit by $1 million increments in potential compensation per claim. However, it is not considered a primary insurance policy. Commercial umbrella insurance serves as a backup or buffer to your regular business policies. Let’s go over how it works.

This insurance provides additional coverage for the following:

Third-party liability

Adding commercial umbrella insurance to your general liability insurance provides coverage for medical and legal expenses if someone gets injured while inside your business premises. It also helps cover the costs of replacement or repair to damages on customer’s property and inventory.

Employee work injuries

When you have commercial umbrella insurance added to your employer’s liability insurance, you will have extra protection against employee lawsuits for injuries sustained while at work.

Vehicular accidents

With umbrella coverage, you will have additional protection from lawsuits arising from the damages caused by your vehicle in the event of an accident. It will cover the excess liability that will not be covered by your commercial auto insurance policy.

What are the exclusions?

Remember that commercial umbrella insurance does not provide coverage for all types of claims. It cannot be used to cover certain damages nor added to specific types of insurance policies. Take note of the following exclusions:

Damages covered by the main policy limit

Since the commercial umbrella insurance is just an extension, it will not cover the cost of damages that is still covered by the underlying insurance policy.

Professional mistakes or malpractice lawsuit

You would still need a professional liability insurance policy to protect against lawsuits from errors or omission, such as undelivered services or professional mistakes.

Claims for employee discrimination

Employee lawsuits related to harassment, discrimination, or wrongful dismissal are covered by employment practices liability insurance (EPLI). An EPLI policy provides coverage for legal expenses incurred by the business plus the settlement cost.

Business property damage

Commercial property insurance covers property damages from theft, fire, and weather-related occurrences. This is another type of insurance where commercial umbrella insurance cannot be added.

Who should get commercial umbrella insurance?

A lot of businesses can benefit from having commercial umbrella insurance. Assess the potential liabilities you might encounter in your business operations and determine if it is worth the extra cost. If your business is vulnerable to high liability claims, adding commercial umbrella insurance is a prudent move.

How much does it cost to get commercial umbrella insurance?

Like most insurance policies, the cost of commercial umbrella insurance depends on the amount of underlying coverage, type of industry, location, and size of your business. The more risks involved in your business operations, the higher your insurance coverage cost. For instance: if your business is open to the public, your workers operate heavy machinery, or you operate a fleet of commercial vehicles, your insurance cost will be more expensive compared to that of an office-based business.

In summary, commercial umbrella insurance provides an extra layer of coverage for risks that are excluded by most liability insurance policies. The tricky part is knowing what is covered and what is not. Talk to your trusted insurance agent for guidance. Do not forget to ask if you need to file a separate claim for commercial umbrella insurance or if the coverage is automatically tied to the underlying policy. If not, you will have to file two claims, one for the primary policy and another for the umbrella insurance. Make sure all your questions are answered to help you choose the right insurance coverage for your business needs.

About Moody Insurance Worldwide

Moody Insurance Worldwide, a division of Moody & Associates that was founded in 1914, is a leading provider of risk management programs and insurance coverage to individuals and businesses across the East Coast. We write all sizes of businesses, with technical expertise in many key industry areas, and provide personal insurance programs for estates and high net worth individuals. Our licensed, experienced commercial account managers can work with you to determine the coverage that you need at a competitive rate. Contact us today at (855) 868-0170 to learn more about what we can do for you.