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Does your business need commercial umbrella insurance?
Organizations that often purchase umbrella policies are those that operate in high-risk environments, like high traffic retail shops, large vehicle fleets, and companies with expensive equipment or frequent injuries. In some industries such as construction, it is common for businesses to enter into contracts that require umbrella insurance.
In recent years, the cost of litigation has increased, which underscores the importance of being properly covered. An umbrella policy offers additional coverage to ensure a business is properly covered. A handful of small accidents have the potential to go over typical coverage limits and a commercial umbrella policy can provide supplemental support if that were to occur.
How does commercial umbrella insurance work?
A commercial umbrella policy is different from most other insurance policies. It functions as an extra layer of insurance over the primary policies that are already protecting your business. An umbrella policy typically only pays claims when the underlying insurance policies have reached their coverage limits and there are still damages to be paid. A business cannot purchase just an umbrella insurance policy. You would need to also purchase an underlying business insurance policy or policies to cover initial claims.
For example, if a customer was injured on a business’s property and filed a $2 million lawsuit, a general liability insurance policy with a $1 million per-incident limit would cover the first $1 million in damages. Then the business would need commercial umbrella insurance to cover the remaining $1 million in damages. If commercial umbrella insurance had not been added to the general liability policy, that business owner would have to pay the uncovered $1 million in remaining damages out of pocket.
What does commercial umbrella insurance cover?
Commercial umbrella insurance can extend coverage limits for either general liability insurance, employer’s liability insurance, or commercial auto insurance. If damages, lawsuits, or medical costs exceed the limits from one or more of these policies, umbrella insurance can cover the remainder so it doesn’t come out of your pocket.
The additional coverage from an umbrella policy can be used for:
Third-party bodily injury
Third-party bodily injury is included under a general liability insurance policy and covers legal costs if a customer or visitor is injured on your company’s property. An umbrella insurance policy can cover additional expenses on a per-occurrence basis or expenses that exceed the policy lifetime limit.
For example, if an accident occurs on the property that results in medical expenses for the customer of $2 million, a general liability insurance policy with a $1 million per occurrence limit will cover the per-occurrence limit of $1 million but the remaining $1 million would be covered by the commercial umbrella policy.
If a commercial umbrella insurance policy was not in place, the business would be responsible for paying the additional $1 million.
Third-party property damage
Like third-party injuries, third-party property damage is covered under general liability insurance policies. Commercial umbrella insurance that is added to a general liability policy will help cover expenses over policy limits due to customer or visitor property damage.
For example, if a plumber does not finish an installation correctly and water leaks throughout the customer’s building overnight, the general liability policy will pay up to the policy limits and then the commercial umbrella policy will cover the remaining expenses.
Commercial umbrella insurance can be added to your employer’s liability insurance which is typically part of a workers’ compensation policy. Employers’ liability covers businesses from employee lawsuits and damages due to work-related injuries.
For example, if a construction employee has an accident on the job, and it is determined they should be compensated under the workers’ compensation policy, the workers’ compensation policy will pay for medical and legal expenses up to the policy limits and then the commercial umbrella policy will pay for the remaining expenses.
A commercial umbrella policy will also add supplemental coverage to a commercial auto insurance policy or hired and non-owned auto insurance policy. It pays for damages above your auto liability limit for accidents caused by motor vehicles owned or operated by your business.
For example, if your delivery driver causes a multi-vehicle accident on the way to a client’s house, the cost of damage can quickly exceed the typical commercial auto insurance policy limits. A commercial umbrella policy will make sure that the extra damages will not have to be covered out of your pocket.
What does commercial umbrella insurance NOT cover?
While the term umbrella makes it sound like a commercial umbrella policy will cover everything, there are business insurance policies and other scenarios that cannot use umbrella insurance coverage. This includes damages within policy limits, a claim that is not covered by an underlying policy, commercial property damage, professional liability insurance, and employment discrimination lawsuits.
Damage within policy limits
Commercial umbrella insurance cannot be used to cover claim expenses that are already fully covered by underlying policy limits.
For example, if a customer hurts themselves on your property and there is a general liability insurance claim, commercial umbrella insurance can’t be used for payment coverage unless the claimed damage exceeds the policy limits outlined in your general liability insurance policy.
Claims not covered by an underlying policy
If there is not a business insurance policy in place (general liability, employer’s liability, or commercial auto) to cover the initial insurance claim, an umbrella insurance policy cannot be used to help pay for damages.
Commercial property damage
If business property is destroyed, damaged, or stolen you will need a commercial property insurance policy to pay for its replacement. Commercial umbrella insurance can only be added to liability policies.
For example, if your manufacturing product inventory is stored in your warehouse which burns to the ground, your business will require a commercial property insurance policy to cover the cost of lost inventory.
Professional liability insurance
Umbrella insurance cannot be added to a professional liability insurance policy that covers lawsuits involving professional mistakes, service errors, and malpractice.
Employment Practices liability insurance
Employment practices liability insurance covers businesses against lawsuits related to employee wrongful termination, harassment, or discrimination. Commercial umbrella insurance is not applicable to lawsuits exceeding this policy’s limits.
How much does commercial umbrella insurance cost?
The cost of commercial umbrella insurance varies greatly depending on your business’s level of risk, industry, and how much additional coverage you need. The advantage of adding commercial umbrella insurance is the increase in coverage is typically less in premium than primary policies.
When thinking about how much commercial umbrella insurance you need, some things you should consider are:
Due to the many differences in each business, you will need to speak with a qualified insurance representative who can help you receive an accurate quote for your business.
How do I make a commercial umbrella insurance claim?
Most carriers have online claim reporting capabilities, or you can call their toll-free claims reporting phone number. At Winooski Insurance Agency, we are available to provide information about the claim reporting process. Our clients can rest easy knowing our experienced agents are ready to help when needed.
View a list of our partner carriers and instructions on where to file a claim with each.
Why should I get commercial umbrella insurance through an independent agency?
Winooski Insurance has been an independent insurance agency for almost 40-years. During this time, we have created long-term relationships with a multitude of insurance partners which allows us to present you with a broad range of coverage options at competitive rates. We’re committed to helping you address your unique requirements.
“ The entire team at Winooski Insurance have done an outstanding job of providing insurance coverage for my company. This is not always easy, as each project has to be reviewed by Winooski Insurance to verify that we have the required coverages. ”
David Bogue, President
Professional Construction Inc.
“ I have had my company insured with Winooski insurance for more than five years now. They are a valued partner in protecting my business property, employees, and vehicles. From the top dog, Jeff Mongeon, through their entire team, they are professional and responsive. ”
David Evarts, President
“ The team at Winooski Insurance provides our companies with value added services to ensure we are protected from all angles. They have helped us solve a number of complex problems and their service is always friendly and quick. Winooski Insurance is a valued and important part of our team. ”
Robert Murano, Jr., President
Mansfield Housing Group