What is Umbrella Insurance for Business?
Commercial excess and umbrella insurance provides an extra layer of coverage over a business’s underlying liability policies.
How commercial excess and umbrella coverage works
Commercial excess and umbrella coverage responds if you exceed the limits of your underlying liability coverage.
Liability insurance policies limit the total payout for any given claim. A commercial excess and umbrella policy starts responding once the underlying limit is exhausted on a commercial auto policy, businessowners policy (BOP), commercial package policy (CPP), general liability policy, or employers liability policy. In some instances, it may also provide coverage even if there is no coverage under the underlying insurance.
Here’s how it works:
An employee causes a car accident while performing job-related duties.
The resulting judgment for the injury claim is $1.1 million, but the liability coverage on the business’s commercial auto policy has a limit of $1 million.
A commercial excess and umbrella policy would kick in to pay the remaining $100,000. Without umbrella insurance, the business would be responsible for that additional $100,000.
| Bodily Injury Claim This is the judgment issued against the business. |
+$1,100,000 |
| Your Liability Limit Your auto policy would pay this. |
-$1,000,000 |
| Remaining Expense A commercial excess and umbrella policy would pay this. |
=$100,000 |
Choosing the right underlying limit
Commercial excess and umbrella insurance has a high retention that can be covered by the underlying liability policies. Because the retention is so high, it is important to maintain a minimum liability limit on all those policies.
If the business does not meet the minimum liability limit to cover its umbrella retention, the business may be responsible for the difference. Carefully review your umbrella policy to determine what your policy’s retention is.
An independent agent can help ensure that you have the coverage you need. Take the time to contact a licensed business insurance broker or agent, who can provide more detailed information, help solicit quotes from insurers, and answer any questions you have.