What is Commercial Umbrella Insurance? A Guide for Small Business.

While Umbrella Insurance can help keep your business dry in a storm, it’s important to remember it can’t cover everything. A general liability extension might be a better name as it attaches to an underlying policy (auto, general liability, workers comp, etc.) to help cover you if you meet or exceed the limits of your current policy. 

Commercial umbrella insurance can provide an extra $1 million or more in coverage if your general liability insurance runs out. You can’t buy umbrella insurance on its own, but you can get it as an extension of your general plan. 

A Layer of Protection

Before you choose your umbrella policy, it’s important to understand what it is, and what it isn’t. The umbrella policy is a layer of protection from the rain, not a guarantee you won’t get wet and it kicks in when other policies don’t completely protect you. 

So what will a commercial umbrella insurance policy cover?

• If a business is found liable and they need to pay damages
• If a business is sued and needs to pay for a legal defense
• If a customer is injured on their property and needs to pay medical bills
• If a business posts a blog or post that is false and they are sued

If a payout exceeds basic liability and an umbrella policy, then you are responsible for covering the rest. In this case, all of the business assets are exposed. Umbrella insurance is used to prevent the possibility of financial ruin due to an accident, slip of the tongue or worse. 

Choosing Your Plan

You want the combination of your general liability and your umbrella policy to cover two things.

1. All of the assets in your business, but also a
2. The assets you might attain in the foreseeable future. 

If you are small now, but expecting massive growth over the next year, it’s a good idea to estimate the number of your assets after that growth and get enough of an umbrella policy to cover that number. 

When choosing a plan, you will want to go through exactly what is being protected in order to make sure you have the right coverage given your assets. 

When deciding, you should ask yourself, “What’s the minimum amount of coverage you can get based on what you have to lose?” You may not know the answer to this, which is why it’s important to work with an agent, but also feel empowered to make your own decisions based on your businesses. 

It’s important to note that while you can buy a policy for your business and a personal policy, the two cannot overlap. If you own a business, it’s a good idea to add umbrella insurance to your existing policy. Not sure if it’s right for your business? Find out with our handy dandy business insurance calculator. It’s a free online assessment and only takes about 30 seconds to complete.