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Do You Need a Commercial Umbrella Policy?

Commercial Umbrella PolicyCommercial Umbrella Policy
min read
August 21, 2023

We carry umbrellas to know we’ll stay safe and dry when a storm comes. A commercial umbrella insurance policy can give you the same peace of mind about your business. When faced with a claim that your other commercial insurance policies don’t cover, or when you’ve exhausted the limits of your traditional business insurance coverage, your commercial umbrella insurance comes into play. 

You won’t use your umbrella insurance all the time. But when the financial storms of life land on your business, it’s an additional coverage that can protect you. 

Below we dive into why commercial umbrella insurance policies are so important, what they cover, how much they cost, and how much protection you need for your company. You’ll also learn which businesses most need this type of liability coverage. 

What Is Commercial Umbrella Insurance?

Commercial umbrella insurance is a type of policy you can purchase in addition to other types of business liability insurance. It provides extra protection for your business by upping your limits on insurance policies you already have. You can also use this policy to pay legal defense costs. 

Commercial umbrella insurance is not a stand-alone policy that you can use to avoid buying insurance. If you don’t have underlying insurance policies in place, like general liability or commercial auto insurance, your commercial umbrella coverage won’t kick in.

Commercial umbrella insurance rides on top of your other business insurance and kicks in after those limits are exceeded.  

Commercial umbrella insurance policies typically cover multiple locations. This means whether an incident takes place in your office or at a client’s house, your umbrella policy can come to the rescue. 

How Does Commercial Umbrella Insurance Work?

Here’s a scenario to help you see a commercial umbrella insurance policy in action: 


You’re in the construction industry, working hard on a new build for a client. Unfortunately, a beam fell and hit two people as it careened to the ground. They were both seriously injured.


Now you’re looking at a $2.5 million lawsuit between the two of them. Your general liability policy only has a $2 million limit for bodily injury, making you responsible for the remaining $500,000. Thankfully, you have a commercial umbrella policy in place. And once the limits of your general liability insurance are exhausted, it begins to work. 


Other troubling scenarios that could put your business at financial risk are:



Without any extra coverage, these incidents could have a huge impact on your finances. But if you have a commercial umbrella insurance policy, you can breathe a little easier. 


Once you’ve exhausted your relevant insurance’s liability limits, this policy kicks in. It can cover the remaining costs so they don’t have to come out of your pocket. 

What Does a Commercial Umbrella Policy Cover? 

Your commercial umbrella policy protects several business locations and properties and extends coverages on other insurances you may already have, including:

Costs a commercial umbrella policy can cover include: 

*Unlike Part One of workers’ comp policies, which has unlimited coverage for employee injuries, Part Two has a $1 million limit for things like third-party lawsuits. For example, if an employee gets injured on a piece of equipment and sues the manufacturer, but the manufacturer turns around and sues you for improper use, the cost of that lawsuit would fall under part two of your plan. You can use umbrella insurance to cover costs over your $1 million limit.

What Does Commercial Umbrella Coverage Not Include? 

While a commercial umbrella insurance policy can offer peace of mind, it doesn’t protect you from every type of claim your business may face. These policies typically don’t cover: 

Since the exact wording on policies can vary, make sure you read your commercial insurance policy carefully to know what is and isn’t covered by your insurance company’s policy. You don’t want to find out the hard way that something isn’t included. 

Does My Small Business Need an Umbrella Policy? 

Most businesses could benefit from the extra protection that a commercial umbrella policy offers. However, some companies really shouldn’t be without this coverage.

Here are some factors that increase your liability risks. If your business has any of these and you don’t already have an umbrella policy in place, it’s time to consider getting one.


If you aren’t sure if a business umbrella policy is a good fit, discuss your risks and current coverage with your insurance broker. 

How Much Liability Insurance Does Your Business Need? 

If you don’t get enough commercial umbrella coverage, your business is still at risk if you get sued. But you also don’t want to pay for excessive coverage amounts. 

So how do you decide how much umbrella insurance you need? Here are a few questions to ask yourself to find the perfect amount. 

You can typically select coverage amounts between $1 million and $10 million in increments of $1 million, so talk to your insurance broker about what might make the most sense for your business. 

How Much Does Commercial Umbrella Insurance Cost?

In general, $1 million worth of protection costs a few hundred dollars a year. However, this number can go way up depending on your risks. Your insurance quote depends on the many factors examined during the underwriting process, including: 



The best way to get an exact price for your umbrella insurance policy is to request a quote from a broker familiar with your company’s insurance needs.

Is a Commercial Umbrella Policy the Same Thing as Excess Liability Insurance? 

No, though they are similar. Excess liability provides additional coverage for only one of your business’s liability policies, while umbrella insurance can be used across multiple policies. 

Protect Your Company with the Right Business Insurance 

Life happens, and you never know when your business will get slapped with a lawsuit. Your customer could fall and get hurt. Or your employee could cause a car accident. Protecting your business is essential. 

Having a commercial umbrella insurance policy in place can do just that. It’ll activate and start paying once your primary policies reach their limits, protecting you from paying large amounts out of pocket. And now that you know all about commercial umbrella policies, all that’s left to do? Get in touch with your insurance agent and ask about one!

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