An umbrella insurance policy is extra liability insurance coverage that goes beyond the limits of the insured’s general liability, commercial auto and workers’ compensation insurance. Umbrella insurance can provide coverage for injuries, property damage, certain lawsuits, and personal liability situations. Small businesses use an umbrella insurance policy as an additional layer of security to guard against potential monetary damages arising due to claims.
For example, if a driver runs a red light and accidentally hits another car, there might be significant damage to the vehicle and several people might be injured.
With car repairs totaling $50,000 and the treatment of the injuries eclipsing $500,000, the driver at fault may be liable for expenses that go far beyond the coverage limits of their insurance. An umbrella insurance policy will pick up the additional liability costs beyond the limits of car insurance coverage.
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- An umbrella insurance policy is a type of personal liability coverage that goes above and beyond the amount that regular business insurance offers.
- To own umbrella insurance, you must own standard general liability, commercial auto, or workers comp policy first; the umbrella policy kicks in after the regular coverage has been exhausted.
- Businesses usually purchase an umbrella policy to fulfill contracts calling for limits of more than $2 million. In the case of a $5 million contract an umbrella policy with a limit of $3 million would be added to a policy with a $2 million limit to meet the requirement.
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Commercial umbrella insurance doesn’t cover every kind of claim. It also doesn’t extend the limits of certain types of policies, like commercial property insurance.
Let’s say a fire significantly damages your business’ equipment. The cost to replace and repair your property exceeds your commercial property coverage limits. You’d have to cover the difference out of pocket because commercial umbrella insurance doesn’t cover business property claims.