Commercial umbrella insurance
Commercial umbrella insurance
Commercial umbrella insurance provides coverage when you go over the limit on your general liability, employer’s liability, or commercial auto insurance policy.
Why do you need commercial umbrella insurance?
Costs from minor incidents or a big accident add up quickly. When they exceed your insurance policy limits, you’re left paying the remainder out of pocket – often thousands or more. That’s where umbrella insurance comes into play.
A commercial umbrella insurance policy serves as an extra layer of protection. It can provide additional coverage for your:
- General liability insurance
- Employer's liability insurance (part of workers’ compensation insurance)
- Hired and non-owned auto insurance (HNOA)
Umbrella insurance boosts your liability limits in $1 million increments and is often needed in order to fulfill a contract that requires higher than standard policy limits. Even when it's not required though, it's still highly recommended for extra peace of mind.
Umbrella coverage can help pay for your medical expenses, legal defense, and even a settlement. However, this policy won't cover property damage.
Small businesses that purchase umbrella liability coverage:
- Regularly handle other people’s property
- Are open to the public
- Rely on employees driving as part of their job
What does commercial umbrella insurance cover?
With umbrella insurance, you’re still protected even when a lawsuit drains your policy limits.
If liability claims covered by your commercial general liability insurance, employer's liability insurance, or hired and non-owned auto insurance exceed your policy limit, commercial umbrella insurance takes care of the extra costs.
This includes:
Third-party bodily injury
When you add commercial umbrella insurance (or excess liability insurance) to a general liability policy, it helps pay for medical expenses or legal expenses if someone injures themselves on your business’s property.
Car accident liabilities
When you add commercial umbrella insurance to hired and non-owned auto insurance, it can cover the cost of medical bills and legal expenses resulting from a traffic collision.
Employee injuries
When you add commercial umbrella insurance to employer's liability insurance (included in workers' compensation insurance), it boosts your protection if an employee blames you for an injury or illness. For example, it would help pay for an education technology professional's repetitive strain injury after years of working at a keyboard.
Lawsuits over third-party property damage
When you add umbrella insurance to a general liability policy, it can help cover the cost of lawsuits related to damaged property.
How much does umbrella insurance cost?
Commercial umbrella insurance costs on average $40 per month for each $1 million of additional coverage.
The cost of umbrella insurance is based on several factors, including:
- Business size
- Location
- Your risks
- Your industry
- Your claims history
How does business umbrella insurance work?
Umbrella insurance is not a standalone policy; you add it to policies you already have. Think of it almost like a safety net.
For example, suppose a customer trips over a power cable and breaks their leg in a busy computer repair shop. The customer then sues for $1.5 million, but the shop’s general liability policy only has a $1 million per-occurrence limit.
Luckily, the business owner bought an umbrella policy for an additional $1 million of coverage before the accident happened. The general liability policy would pay for the first $1 million, and the umbrella insurance would then cover the remaining $500,000.
With umbrella insurance coverage in place, you’ll be safe from having to pay out of your own pocket for costs if a claim or claims go over the limits of your underlying policy.
Who should get commercial umbrella coverage?
Commercial umbrella insurance is valuable to a variety of small businesses, including freelancers, limited liability companies, and independent contractors.
Even though it is beneficial across all professions, it is especially useful for technology and software businesses, including:
IT staffing agencies
IT staffing agencies can have heavy foot traffic from clients of all walks of life. This can be a liability.
For example, suppose a client trips in your agency and sustains serious injuries that leave her with a chronic health problem. To recoup the cost of medical expenses, she decides to sue the agency for millions of dollars in damages. Umbrella insurance would then help the store pay for the damages.
Digital marketing agencies
Digital marketing agencies face numerous risks, ranging from car accidents while driving business-owned vehicles to accidental client injuries at the office. Umbrella insurance provides key extra coverage for these array of risks.
For instance, suppose on the way to deliver goods to a client, a digital marketing specialist driving a company car causes a pile-up. The other drivers sue for compensation that totals more than a million dollars. In this situation, a commercial umbrella policy can cover medical expenses, the cost of hiring an attorney, and the amount judged fair for damages.
Web design companies
In order to complete their jobs, web designers may have to sit at their computers for long periods of time. This could result in several health issues, such as carpal tunnel, which may be a liability for web design companies.
For example, suppose a long-time employee at a web design company sues his employer over a chronic, work-related health problem that cost him more than $1 million dollars in hospital stays and physical therapy. In this situation, an umbrella policy can cover the company's legal expenses, including a court-ordered judgment or a settlement.
Telecommunications companies
Telecommunications companies usually send out installation specialists in business vehicles to perform services for their clients. If their installation specialists are involved in a car accident that exceeds the company's commercial auto policy's limits, umbrella insurance would take care of the excess costs.
For instance, a telecommunications supplier accidentally backs a company van into a client’s warehouse, destroying inventory and causing millions of dollars in damages. The client sues for damages. In this situation, a commercial umbrella policy would help cover the supplier's legal expenses and damages beyond their auto liability's policy limits.
What isn't covered by commercial umbrella insurance?
Commercial umbrella insurance provides excess coverage to an existing policy's limits, but it doesn't cover all risks associated with running a business.
To fully safeguard your small business, you should get other business insurance policies and remember these important considerations to protect against the following exclusions:
Professional errors
Errors and omissions insurance (E&O), also known as professional liability insurance, can cover lawsuits over professional mistakes, including undelivered services and missed deadlines. You can buy a policy called excess liability insurance, or excess E&O, to boost your E&O limits.
Business property damage
Umbrella insurance boosts the coverage of liability policies only. Commercial property insurance, included in a business owner's policy (BOP), can help pay for expenses to repair or replace your business property when it's damaged by fire, theft, and some weather-related events.
Amount of coverage within the underlying policy's limits
Though umbrella insurance boosts the protection of an existing liability policy, it only kicks in when the limits of a policy's underlying coverage has been exceeded.
Unfortunately, no small business is immune to unexpected catastrophes and high-priced lawsuits. Commercial umbrella insurance protects you from expensive claims that exceed the limits of your liability insurance policies.
Other common questions about commercial umbrella insurance
How do you get a certificate of insurance?
TechInsurance is a trusted insurance expert for all small business owners, including contractors and consultants, with extensive knowledge of the IT sector. Our licensed insurance agents are available to answer your questions and help you find the coverage that's right for your business needs.
With TechInsurance, you can easily download a certificate of liability insurance for your small business, often on the same day you buy umbrella coverage or another insurance product.
This comes in handy for companies and consultants that need proof of insurance to sign a contract or a lease and don’t have time to call an insurance company for documentation. Clients and landlords may ask for a certificate of commercial umbrella insurance or other types of business insurance to show you’re insured.
Do small businesses really need extra coverage?
Small businesses have their own unique risks of injuries or accidents, but also face many of the same risks as bigger businesses. But they have fewer resources to cope with a lawsuit, and the costs of accidents are on the rise.
That’s why a business umbrella policy can be critical for small businesses that:
- Are required to carry limits higher than $2 million
- Have high liability risks, such as a storefront
No matter your business size, you could still get stuck with a hefty lawsuit. If you’re in a high-risk business, you should consider boosting your policy limits with umbrella insurance. It’s a relatively cheap way to amp up your coverage – and it could prevent a major headache in the long run.
How is umbrella liability insurance different from excess liability insurance?
Excess liability insurance is similar to umbrella insurance – so similar that the terms are sometimes used the same way. Both provide protection when the underlying policy limits run out.
The main difference is that umbrella insurance can provide liability protection over multiple policies. Excess liability insurance boosts coverage limits for only one policy, usually errors and omissions insurance or general liability insurance.