Commercial Umbrella Insurance: What Does It Really Cover?

What Is Commercial Umbrella Insurance?

Also known as “excess liability” insurance, commercial umbrella insurance goes beyond the limits of other traditional policies. If a loss occurs, but you exhaust the limits of your underlying policy—a policy that typically covers that particular claim—umbrella insurance steps up to help.

While various go-to insurance policies, such as general liability (GL) or professional liability, are an excellent idea, no one policy covers everything. To widen your “safety net,” commercial umbrella insurance is an affordable choice as opposed to increasing your initial policy.

For example, a GL policy often works underneath umbrella coverage. Naturally, when a GL-related loss happens, an insured draws from the GL policy first. But when those limits run out, turning the commercial umbrella policy is the next move. It works to extend the impact of the initial policy.

What’s more, umbrella insurance is customizable. You can assign it as additional coverage for one policy or many. Besides, umbrella insurance can cover a broad range of risks in insurance. Its versatility includes paying for litigation costs, restitution for an injury, settlements, medical expenses, and physical damage. It genuinely is an extension of the original policy.

What Does It Cover?

As mentioned, umbrella insurance is multifaceted so that it provides an added layer of security on top of traditional underlying coverage. Following are a handful of areas it covers:

Bodily Injury

When your business activities cause physical injury or illness to an individual, it falls under this category. Umbrella insurance often steps in to cover medical bills or lawsuits that exceed your traditional policies. Keep in mind that a mere “slip-and-fall” situation can escalate in a flash, to name one example, quickly becoming costly and time-consuming for you.

Property Damage

Insurers describe this aspect as damage, destruction, or theft to property belonging to a third party. Property damage often occurs through another’s negligence, purposeful destruction, or even by nature. Plus, it includes a multitude of real or personal property to which the damage could occur.

Personal and Advertising Injury

When a reputation has been damaged, umbrella insurance can help to decrease the legal blow. That said, personal injury may include the following:

• Slander
• Libel
• Invasion of privacy
• False arrest
• Malicious prosecution
• Wrongful eviction
• Detention or imprisonment

When the injury is associated with advertising material, copyright infringement, or misappropriation of advertising ideas, umbrella insurance could help, as well.

Contractual Liability

This aspect only regards “insured contracts,” such as leases and easements. Commercial umbrella insurance can help you cover legal expenses arising when you accept the tort liability of another responsible party. For example, companies frequently assume a landlord’s tort liability when they rent office space.

Court Costs

Legal and defense fees can skyrocket in a heartbeat. Umbrella insurance can help to cover these particular expenses when you find yourself in the middle of a lawsuit.

On the flip side, when pondering “what does BOR stand for,” it’s worth noting that umbrella insurance usually doesn’t extend its protective embrace to personal property (yours, specifically), criminal activities, or the aftermath of flood damage. Additionally, it becomes imperative to meticulously outline the contractual terms with hired personnel. There may be instances where you’re constrained from expanding coverage in accordance with the contract.

Who Needs Commercial Umbrella Insurance?

Although commercial umbrella insurance isn’t typically required in most industries, it’s crucial to review your exposures to see how vulnerable you genuinely are. Think of it this way; you don’t necessarily need an umbrella when you’re caught in a rainstorm, but it sure can help!

Consider these facets of your profession to help you determine whether commercial umbrella insurance would benefit your business:

Client Base

If a slip-up or accident occurred on your part, do you have clients who stand to lose a lot? Having high net-worth clients is an excellent reason to purchase commercial umbrella insurance. General liability insurance would cover some of the claims, but commercial umbrella insurance could ensure you don’t dip into your savings.

Significant Exposures

Several policies can work underneath commercial umbrella insurance. However, the three most popular are general liability, employer’s liability, and auto liability. When you frequently deal with claims relating to any of these policies, it’s a good idea to elect an additional layer of protection.

Contract Requirements

Basically, some contracts require you to have particular coverage in place. It’s not unheard of for clients to require a commercial umbrella policy, either. For example, vendors and landlords often require this specific coverage.

Higher Limits

Aside from requirements, some clients want you to have higher limits and won’t sign a contract until you fulfill their demands. Landing the deal will be tremendous, but not if it costs you significantly. Commercial umbrella insurance is a financially savvy way to bolster your coverage without breaking the bank.

Business Reserves

When you want to spare your business reserves for something other than lawsuits, it’s an excellent idea to purchase commercial umbrella insurance. As you know, a crushing judgment or settlement can bankrupt your business. To err on the side of caution by electing commercial umbrella insurance can protect your professional assets in the event of an expensive claim.

How Much Does It Cost?

In light of a high-dollar lawsuit, the premium for commercial umbrella insurance is a mere drop in the bucket. In other words, commercial umbrella insurance is one policy where you get a lot of coverage for the premium.

Of course, each business requires different coverage. Industry trends impact how much coverage you need, as well. It’s vital to secure a quote to get a more accurate estimate for your particular situation.

Understanding what additional coverage your company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.

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