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Understanding Business Umbrella Insurance

More businesses are purchasing commercial umbrella insurance to give themselves more cushioning against liabilities. According to research, the global commercial umbrella insurance market is expected to grow from $72.5 billion in 2021 to $170.7 billion in 2031, marking a CAGR of 9.2%.

Business umbrella insurance is essential if your business needs to provide coverage beyond the limits of its other policies for liabilities towards injuries or property damages to a third party. These damages include invasion of privacy, slander, vandalism, and libel.

Here’s a look into commercial umbrella insurance and why your business should consider acquiring a policy.

What is Commercial Umbrella Insurance?

Commercial umbrella insurance provides liability protection that covers costs that exceed your other liability coverage limits. Therefore, it complements your other liability coverages, taking over when their limits have been exceeded.

For instance, if your company is found liable for customer injury at its premises and gets sued for $1.2 million, but your liability insurance can only cover up to $1 million, a commercial umbrella insurance policy can help cover the remaining $200,000 above the limit, subject the policy’s own limits.

How Does Commercial Umbrella Insurance Work?

Your business typically must have commercial auto or general liability insurance to add business umbrella insurance to its policy. A business umbrella insurance policy only extends the coverage limits for third-party property damage or bodily injury claims.

Therefore, other coverages such as commercial property, professional liability, and cyber liability insurance do not have their limits extended by this policy.

Commercial umbrella insurance coverage will pay for the additional amount up to its own limits. If you don’t own this policy, you’ll have to pay out of pocket for the excess amount from your primary policy’s limit.

Commercial umbrella insurance differs from excess liability coverage. Unlike commercial umbrella insurance, which extends the coverage limits of different policies simultaneously, excess liability coverage only extends the limits of one specific liability policy.

Some insurance companies offer commercial umbrella insurance that extends the limits of commercial auto insurance and commercial general liability insurance from different insurance companies.

Who Needs Commercial Umbrella Insurance?

A broad range of businesses can benefit from having a commercial umbrella insurance policy. Typically, businesses in construction, hospitality, professional services, and manufacturing benefit the most from getting this insurance policy.

These businesses are more predisposed to injuries and property damage, including negligence claims, lawsuits, and professional errors.

Which Insurance Policies Do You Need to Add Commercial Umbrella Insurance?

Here’s a comprehensive list of liability insurance policies that can benefit from commercial umbrella insurance.

General Liability Insurance

General liability insurance protects your business from various claims, such as bodily injury and property damage from clients and customers, reputational harm, copyright infringement, and advertising injury.

Commercial Auto Insurance

Commercial auto insurance protects your business’s cars, vans, and trucks. It is essential to get this coverage since your personal auto insurance policy often doesn’t cover the business use of your vehicles.

Employment Practices Liability Insurance

Employment practices liability insurance offers coverage for lawsuits filed by employees against your company.

Hired and Non-Owned Auto Liability Insurance

Hired and non-owned auto liability insurance provides auto liability coverage for rented and hired vehicles or employee vehicles used for business purposes. It can also provide coverage when driving your car for work purposes.

What Is the Coverage and Limits of Business Umbrella Insurance?

A business umbrella insurance policy helps cover against bodily injury, property damage, and lawsuits. Insurance companies often provide this coverage with aggregated limits ranging from $1 million to $15 million. The aggregated limit represents the maximum the insurer will pay to cover any claims made during the policy period.

A business umbrella insurance policy doesn’t cover business property claims.

For instance, if business equipment gets damaged in a fire, your commercial umbrella insurance will not be able to extend the limits if the cost of replacement and repair exceeds your commercial property insurance limits. You’ll have to foot this out of pocket.

How Much Does Business Umbrella Insurance Cost?

Typically, commercial umbrella insurance costs about $40 monthly for every additional $1 million of coverage. The amount of coverage you choose and your business’s level of risk will determine the exact costs.

Small businesses can expect to pay about $500 annually for a commercial umbrella insurance policy, while larger businesses can pay up to $1,000 yearly.

You can save money on your business umbrella insurance policy by paying the premium upfront compared to monthly payments.

How Can You Determine the Amount of Coverage You Need?

Some industries and professions are predisposed to more risks than others. Therefore, the amount of coverage they’ll need from business umbrella insurance will vary, effectively influencing the cost of the policy.

Here are a few steps you can take to determine your appropriate coverage amount.

Assess Risks

You should keenly evaluate your industry’s potential risks and liabilities to determine the coverage you need. This includes assessing the potential for lawsuits or accidents, your business type, and the financial impact of possible claims.

Review Existing Policies

A business umbrella insurance cover is a complementary coverage to your existing policies. Therefore, to accurately determine how much commercial umbrella insurance you need, you must review your existing policies and identify any gaps in coverage that the commercial umbrella insurance will cover.

Evaluate Assets

You should assess the total value of your business’s assets to ascertain how much financial cushioning you’ll need from commercial umbrella insurance. These assets include equipment, property, and inventory, including tangible assets such as building and machinery, and intangible assets such as brand reputation and intellectual property.

Consider the Worst-Case Scenarios

You should carefully assess the worst-case scenario that can happen in your business and the impact it will have financially. This includes the potential costs of severe accidents, incidents, and lawsuits. Knowing your worst-case scenario will help determine the extra coverage you need from a business umbrella insurance policy.

Get Your Coverage from a Trusted Insurer

A business umbrella insurance policy will save you from hefty out-of-pocket costs associated with liability claims for property damage or lawsuits that exceed your primary policy’s limit. Before settling on a cover, ensure you’ve carefully assessed your business and its risks to select the best coverage that will provide enough cushioning for the worst-case scenarios.

Contact an insurance expert today and let them help you select your business umbrella insurance cover.


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