What is Commercial Umbrella Insurance?

What is Commercial Umbrella Insurance?

Commercial umbrella insurance offers an extra layer of protection against liability. Usually, your liability insurance coverage has a limit up to which your insurance provider will offer coverage should something go wrong with your property, asset, or health. However, if you think you are at an increased risk for unexpected events that can increase your liability beyond what your insurance covers, it’s advisable to get commercial umbrella insurance.

A good insurance policy doesn’t just protect a business from unforeseen events but offers additional protection against things that are usually not covered by your liability insurance. Suppose your employee is out for delivery and causes a serious accident on the road, resulting in your employee and the other party getting severely injured. While your commercial insurance policy might cover the expenses to some degree, if the medical expenses exceed your maximum coverage amount, you will have to pay for the remaining money out of your pocket. That’s where commercial umbrella insurance comes to your rescue.


Understanding Umbrella Insurance Coverage

Commercial umbrella insurance is an add-on to the existing insurance policy. For all the liability claims that exceed your existing insurance policy, the umbrella coverage can be used to cover the additional cost.

Court fees, medical expenses, costs you have incurred due to damages to someone else’s property, and any kind of legal expenses are a few basic types of additional expenses that an umbrella insurance policy covers. These policies also come with a limit, but the maximum coverage is usually enough to cover all your medical bills or legal expenses. For instance, the coverage for commercial umbrella insurance can range between $1 million and $15 million.

That said, a commercial umbrella insurance policy doesn’t offer broad coverage. For instance, if your property gets damaged due to a calamity or the equipment in your store malfunctions due to physical damage, you will need a commercial insurance policy to cover these damages.


How Does It Work?

Commercial umbrella insurance is mainly preferred by reputable businesses that own dozens of assets, and expensive equipment, and are at an increased risk of getting sued. Suppose you get sued for $3 million. You had general liability insurance coverage, but it covered court fees, settlement, and judgment charges up to $2.5 million, as that was the maximum limit.

If you don’t have an additional insurance policy, you will be responsible for arranging the remaining $500,000. You can pay the remaining fee either by withdrawing funds from your business account, which will put your business’s financial stability at stake or you can get them from your personal finances. Both options will disturb your financial stability.

The purpose of a commercial umbrella policy is to cover the liability expenses outside your liability insurance. The extra expenses, $500,000 in this case, will be covered by your umbrella insurance policy. It’s easier and cheaper to obtain a commercial umbrella insurance policy if you buy it from your existing insurance provider, i.e. the place you have bought your auto insurance and general liability insurance. It works as a fail-safe. If your primary insurance coverage has a strict maximum coverage limit, you can rest assured that your expenses will be covered by umbrella insurance and you won’t have to withdraw your savings or borrow a loan.


Who Should Get Commercial Umbrella Insurance?

Usually, large-scale companies or construction businesses are advised to get commercial umbrella insurance, but it’s useful for all sizes of businesses. If you interact with your customers regularly or have employees who work with heavy machinery and equipment, you need commercial umbrella insurance. Other than that, if you are in the construction business or any business where you are required to work on other properties, you should get umbrella insurance.

There’s an increased risk of property damage when you are working on someone else’s property, and your existing liability insurance might not cover the complete cost of damage. So, it’s best to consider an extra layer of protection. Another scenario where commercial umbrella insurance makes sense is when you allow public visits during working hours. Any physical damage to the visitors can result in hefty medical expenses.

How much coverage you need depends on your line of business and the risk you face. It’s best to discuss your work and liability with the insurance provider to determine an ideal commercial umbrella insurance coverage amount.


How Much Does It Cost?

The cost of commercial umbrella insurance can vary depending on the coverage plan you choose and the level of risk your business is exposed to. On average, you can expect to pay $40 a month for coverage of up to $1 million.

Also read: Insurance Claim Settlement: Your Rights

Small businesses might pay less than $500 a year on commercial umbrella insurance, but again, it depends on your risk level and the coverage plan. You can save significantly on your premium by paying it in advance. For instance, you can sign up for the yearly plan that requires paying the insurance premium for the entire year upfront.

The premium also depends on the insurance provider you choose. It’s best to get umbrella insurance from the insurance provider you have your other insurance coverages with.


Other Things to Know About Commercial Umbrella Insurance

If you haven’t noticed already, commercial umbrella insurance is not for everyone. Most businesses or individuals getting umbrella insurance are the owners of expensive machinery, property, or in a line of business that puts them at a higher risk of getting sued.

If you own dangerous items that can lead to physical injuries or cause damage to someone else’s property, you are a good candidate for commercial umbrella insurance. The best example would be a sportsman who participates in skiing, surfing, and other sports that come with a higher risk of injury to other players.

That was all about commercial umbrella insurance policy. If you think your existing commercial insurance or liability insurance won’t cover the damages you might incur, consider getting this extra layer of protection. Compare the prices of different insurance providers and read the coverage carefully before signing up for the plan.