What is Commercial Umbrella Insurance? 

Primary commercial insurance policies offer businesses robust protection from a variety of potential risks. These policies, however, don’t always give businesses all of the protection they need or want. Commercial umbrella insurance builds on the protections afforded by underlying commercial policies to further enhance a business’ insurance protections.

Commercial umbrella insurance is a supplemental liability insurance that’s widely available to businesses. Once the limits of underlying, primary policies have been set to their maximum allowed amounts, commercial umbrella coverage is one of the few ways that businesses can purchase further coverage.

Are Commercial Umbrella Policies Expensive?

Commercial umbrella policies usually provide highly affordable coverage -- and a lot of it. Many policies offer millions of dollars worth of coverage yet have premiums that are relatively low. Insurers are able to provide such high coverage limits and keep premiums low because these are secondary, rather than primary, policies.

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How Do Commercial Umbrella Policies Build on the Protections of Primary Policies?

A commercial umbrella policy may build on the protections of underlying, primary policies in two distinct ways. (Many umbrella policies offer both benefits.)

First, a commercial umbrella policy might offer limits beyond what primary policies are able to provide. For example, a general liability insurance policy may have a maximum limit of $3 million. Beyond this, the policy won’t provide any more coverage regardless of whether a business is willing to pay for additional protection. A commercial umbrella policy might build on this coverage and add another $5 million worth of protection, effectively giving a business $8 million worth of coverage.

Second, a commercial umbrella policy may fill in one or more coverage gaps that primary policies have. A business’ general liability policy, for instance, might have an exclusion that leaves the business exposed to possible lawsuits. A commercial umbrella policy’s terms and conditions may cover this exclusion, offering the business protection where it previously had none.

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Are Commercial Umbrella and Excess Liability Policies the Same?

Commercial umbrella and excess liability policies both offer supplemental insurance coverage for businesses, but there is an important difference between the two policies. Commercial umbrella policies have their own, unique terms and conditions. In contrast, excess liability policies adopt the terms and conditions of the underlying policy that they supplement. Excess liability policies don’t have unique terms and conditions.

As a result of this difference, commercial umbrella normally offers more robust protections than excess liability policies are able to. While commercial umbrella policies can supplement multiple policies at once and fill in coverage gaps, excess liability policies can usually only supplement one primary policy -- and they typically can’t fill in gaps.

What Businesses Can Benefit from Having a Commercial Umbrella Coverage?

Many businesses can benefit from the additional protections that commercial umbrella policies provide. The following are just a few examples of some businesses that may want to purchase this type of insurance:

  • Professionals, as most professionals don’t have the financial resources that a drawn-out liability lawsuit could require
  • Businesses that have lots of property or assets, as they might be the target of an opportunistic lawsuit
  • Companies in high-risk industries, as they’re more likely to have a covered incident or claim

Additionally, nonprofit organizations and municipal governments might also want to procure commercial umbrella coverage. Most nonprofits don’t have many financial resources to pay potential legal fees with. The facilities that governments own and the work they do expose them to many possible risks as well.

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How Can Businesses Get Commercial Umbrella Insurance?

Most commercial umbrella policies have underlying coverages that businesses must maintain. If a business fails to meet a policy’s underlying coverage requirements, the policy’s protections may be nullified. Therefore, it’s extremely important to make sure all necessary primary policies are in place when purchasing a commercial umbrella policy.

For help reviewing commercial umbrella insurance policies and selecting one, business owners should contact an independent insurance agent who specializes in commercial insurance. An independent agent will be able to request quotes from multiple insurance companies and help determine which policy will provide the best protection. They can then check a business’ current insurance policies to ensure all of the umbrella policy’s coverage requirements are properly met. If any changes need to be made to underlying policies, an agent can assist with this as well.


Meet Your Industry Specialist

Jeff Kroeger

Principal, Senior Vice President, and Head of Commercial Lines, Mr. Kroeger also manages the company's hospitality book of business and is that unit's primary producer. He is a graduate of Montclair State University and was named a 2015 Young Gun Insurance Business America.

Jeff has been providing exceptional insurance for restaurants, bars, nightclubs, and more for many years. He understands the unique challenges this industry faces and delivers the right coverage at an affordable price.

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