Commercial Umbrella Insurance Prevent Catastrophic Losses with Commercial Umbrella Insurance

What is Commercial Umbrella Insurance?

A commercial umbrella insurance policy extends the coverage provided by your primary insurance. It introduces an additional layer of protection designed to cover claims that could surpass the limits of your standard insurance coverage.

How does a Commercial Umbrella Policy Work?

How Do Umbrella Policies Work?

A commercial umbrella policy works by extending the limit of your underlying policy. In order for it to take effect your existing policy must have already reached its coverage limit.

Let's look at a scenario where there is a small business with a $1 million limit on their underlying policy. They also have a commercial umbrella policy of an additional $1 million.

A situation arises where a customer slips and falls on a wet floor that wasn't properly marked. Between legal costs and medical payments, it ends up costing the insured $1.5 million.

This is a breakdown of how the claim would be paid in this situation:

  • The general liability policy (the underlying policy) would initially pay out its full coverage limit of $1 million.
  • Once the full limit is exhausted, the commercial umbrella policy kicks in (up to its limit)
  • In this situation, the umbrella policy will only have to pay out $500,000
  • The business owner is covered up to $2 million in this situation - $1 million from the underlying (general liability) policy, and $1 million from the commercial umbrella policy

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What Does a Commercial Umbrella Policy Cover?

As with all insurance policies, the coverage varies based on the terms and conditions outlined within the policy. It is important to understand your specific policy and to know what is covered, what is not covered, and your coverage limits.

With that being said, there are several things you can expect your commercial umbrella policy to cover. These are consistent with the type of coverage that you would find with a business liability policy, such as:

  • Attorney fees
  • Medical expenses
  • Property damage caused by your business

Are Commercial Umbrella and Excess Liability Policies the Same?

While excess liability and commercial umbrella policies have similar functions, there are key differences between the two. One main difference is that an excess liability policy does not enhance the coverages of the main policy, it just offers a greater coverage limit.

On the other hand, an umbrella policy can give you coverage on losses that the primary policy does not. The benefit of this is being able to fill gaps in coverages between policies.