Even with solid primary insurance coverage, some losses are large enough to exhaust your policy limits and leave your business exposed. A commercial umbrella policy provides an extra layer of protection that sits above your existing policies. Here’s how it works.
How Commercial Umbrella Insurance Works
A commercial umbrella policy provides additional liability limits above your existing general liability, commercial auto, and employers’ liability policies. When a loss exhausts your primary policy limits, the umbrella policy activates and covers additional amounts up to its own limit. For example, if you carry $1 million in general liability and a judgment against you is $3 million, a $2 million umbrella policy would cover the gap.
What Umbrella Insurance Covers
Commercial umbrella insurance follows the coverage of your underlying policies — it provides additional limits for the same types of losses, not broader coverage. Most umbrella policies cover bodily injury, property damage, personal and advertising injury, and employer’s liability. They do not cover losses excluded by your underlying policies, professional liability claims, or intentional acts.
How Much Umbrella Coverage Do You Need?
The right umbrella limit depends on the severity of the losses your business could realistically face. A contractor working on multi-million dollar projects, a food manufacturer with broad product distribution, or a cannabis company with significant retail operations might need $5 million or more in umbrella coverage. At minimum, most commercial businesses should consider at least $1 to $2 million in umbrella protection.
Umbrella vs. Excess Liability
An umbrella policy is often confused with excess liability insurance. A true umbrella provides broader coverage — it may drop down to cover losses that fall within gaps between your primary policies. An excess liability policy simply provides additional limits over a specific underlying policy without broadening coverage. Understanding this distinction is important when structuring your insurance program.
Affordable Extra Protection
Commercial umbrella policies are often surprisingly affordable relative to the amount of protection they provide. If you haven’t reviewed your umbrella coverage recently, contact Bozzuto Group for a complimentary analysis of your current program and your overall liability exposure.