What Does Commercial Umbrella Insurance Cover?

You know exactly what you’re getting when you purchase property and auto insurance. But what does commercial umbrella insurance do? Is it necessary?

You already purchased general liability, property, and auto insurance for your business—why do you need commercial umbrella insurance on top of that? Sometimes your policy limits just aren’t enough to cover a claim, leaving you without coverage and scrambling to come up with thousands of dollars to cover the difference.

The Basics of Commercial Umbrella Insurance

Commercial umbrella policies are precisely what the name implies—they provide coverage on top of your already existing general liability, auto, and workers’ compensation coverage. When you exhaust your limits on one of the underlying policies, your umbrella policy provides additional coverage.

So why get umbrella insurance? The simple answer is, even if you have every insurance coverage under the sun, your limits are sometimes insufficient to cover a loss, which can be just as financially devastating as being uninsured. Additionally, commercial umbrella insurance is an inexpensive way to increase the limits on all of your underlying policies in one fell swoop. For example, if you have a $2 million general liability limit and a $1 million umbrella policy, you are covered for $3 million in the event of a lawsuit. This $1 million umbrella limit can also be used as extra coverage for your auto or workers’ compensation policies, making it the most economical option if additional limits are needed all around.

Close up view of person sorting through insurance policy documents

What Does a Commercial Umbrella Policy Cover?

You will only get direct use of an umbrella policy if a large claim on an underlying policy exceeds the policy limits first. For example, let’s say your business has $1 million in coverage under your commercial auto liability policy. Your employee is driving a company truck when they collide with a minivan with four people inside. Each person has serious injuries and needs surgery and rehabilitative care. If each person has $300,000 worth of medical bills and the property damage to the minivan totals $50,000, you have exceeded your auto policy limit by $250,000. If your business does not have commercial umbrella insurance to cover the difference, you are responsible for the full amount.

This may seem like an unlikely scenario, but if something similar happened just one time, it could wipe your business off the map. Commercial umbrella insurance provides a relatively inexpensive solution and can keep your business from going under. In some instances, commercial umbrella insurance can also “drop-down” to cover claims not covered under a primary policy, which can save you or your small business from another financially-devastating claim.

Learn More From Our Industry Experts

Still not sure if commercial umbrella insurance is right for you? Our team of insurance experts can help you identify if you would benefit from extra limits.

What To Consider When Purchasing Commercial Umbrella Insurance

Do you worry that your auto, workers’ compensation, or liability coverage may not be sufficient to cover lawsuit costs in the event of a claim? You may hesitate to increase limits on these policies due to cost, but are you confident your small business could stay afloat if you were responsible for paying the difference on a large claim payment? Commercial umbrella insurance is the best solution if you want to increase your policies’ limits at a lower cost than raising the limits on each.

It is not uncommon nowadays for a car accident or fall to turn into a huge lawsuit, and business insurance is there to protect your business from these suits. As a business owner, it is crucial to consider the risks in your work that could lead to a claim. If the general public has access to your premises, your employees perform work in clients’ homes, or drive often while on the job, your business is more likely to get hit with a serious lawsuit. Commercial umbrella insurance is a no-brainer if you are concerned that a big lawsuit could take down your business forever.

Considering Umbrella Insurance? We Can Help

At Southpoint Insurance, we don’t work to make money for insurance carriers—we work for you. If you are considering commercial umbrella insurance, our experts can help determine your unique risks and the limits that will keep you and your business safe. We will consult with our various carrier partners to find the most comprehensive commercial umbrella policy for you, so you can rest easy knowing your business is protected.

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