What Is Commercial Umbrella Insurance?

Commercial umbrella insurance extends coverage to help pay for costs that exceed certain liability policy limits. Without this type of commercial insurance coverage, business owners would have to pay out of pocket for liability claims that cost more than their coverage limits. This can include:

  • Legal costs
  • Medical bills
  • Damage to other people’s property
  • Judgments and settlements

How Does Commercial Umbrella Insurance Work?

A commercial umbrella policy extends the limits of some primary liability insurance policies, such as general liability insurance and commercial auto insurance.

Let’s say a patient slips and falls on a wet floor in the medical office. The medical costs exceed the general liability insurance limits. If there isn't a commercial umbrella policy in place and the amount that exceeds other policy limits, the business is at financial risk. That’s why it’s important to have umbrella coverage.

What Does a Commercial Umbrella Policy Cover?

A commercial umbrella policy can help cover claims of:

  • Bodily injury, whether it’s an injured customer or employee
  • Property damage the business causes to someone else’s belongings

Be aware that commercial umbrella insurance provides additional coverage on top of a general liability policy. So, if there is no general liability insurance, there would be not be a commercial umbrella insurance.

Commercial Umbrella Limits

Insurance companies write umbrella policies with aggregate limits. These limits can range from $1 million to $15 million. This means the insurance company will only cover claims up to that amount.

What is Not Covered by Commercial Umbrella Insurance?

Commercial umbrella insurance doesn’t cover every kind of claim. It also doesn’t extend the limits of certain types of policies, like commercial property insurance.

Let's say a fire significantly damages the business’ medical equipment. The cost to replace and repair that property exceeds a commercial property coverage limit. The business would have to cover the difference out of pocket because commercial umbrella insurance doesn’t cover business property claims.

Who Should Purchase Commercial Umbrella Insurance?

Typically, the more a business interacts with clients and customers in person, the higher their liability risk. Risks can be even greater if employees use heavy or dangerous equipment.

If the cost of a claim could potentially exceed liability limits for the business, buying commercial umbrella insurance is a good idea. This coverage can help if a business:

  • Frequently interacts with customers
  • Works on someone else’s property
  • Allows the public to visit during open hours

How Much Does Commercial Umbrella Insurance Cost?

Commercial umbrella insurance cost can depend on:

  • Amount of underlying coverage
  • Type of business
  • Business’ size

Some medical specialties face more risks than others, which can increase insurance costs.