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Commercial Umbrella Insurance & How It Works

Andy Rose
by Andy Rose, Head of Channel Strategy and Performance, Main Street America Insurance •

As a business owner, there’s no greater feeling than the peace of mind you get knowing that your investment is fully protected. That’s why you need business insurance. While there are several types of business insurance you might use, adding umbrella coverage to your existing policy can provide an extra layer of protection above and beyond what is covered in other commercial lines policies to make sure your business keeps moving ahead. 

What is Business Umbrella Insurance?

Umbrella policies give business owners extra liability protection beyond the liability limits that are included within general business insurance policies, employer’s liability and business auto policies. It’s rainy-day coverage to help protect against the unexpected costs that can pop up when you reach the limit on your main business owner’s policy. Simply put, business umbrella insurance is an extra layer of protection that has your back to ensure unexpected events don’t have catastrophic results.  

How Does an Umbrella Insurance Policy Work?

Business umbrella insurance covers claims that fall outside of your general liability limits. For example, if an employee gets in an accident with a company vehicle, your business auto insurance will pay damages up to a certain amount. If damages exceed that amount, your umbrella insurance will kick in. Without an umbrella policy, you would pay those costs out of pocket, meaning unnecessary expense for your business..

What does business umbrella insurance cover?

Umbrella insurance covers things like legal fees, medical bills and other costs that exceed your general liability coverage. Business umbrella coverage can be customized for your unique business needs and protect against costly claims, including:

  • An accident caused by an employee driving your company vehicle
  • A lawsuit filed by an employee alleging an unsafe or harmful workplace 
  • A lawsuit filed as the result of a drunk driving accident caused by a customer
  • Damages caused by an unexpected fire in your business

What doesn't business umbrella insurance cover?

It’s important to know that umbrella insurance does not cover everything or extend all insurance policies. Property insurance, for example, cannot be improved by an umbrella policy. If your business faces a loss due to fire and there are damages your property insurance does not cover, they will have to be paid out of pocket. Business umbrella insurance also does not cover:

  • Risks covered within your general policy limits
  • Professional errors and omissions coverage
  • Property damage, which can only be covered by business property insurance
  • Expenses related to wrongful termination, discrimination or other hiring and firing practices

Does your business need umbrella insurance?

Businesses of all sizes have recognized the need for extra liability protection. Some businesses require an umbrella policy to bridge the gap between their standard policy limits and the requirements of a specific contract, or to cover increased risks that could exceed your general policy. 
Those risks can include:

  • A commercial property open to the public 
  • Work that requires you or your employees to perform services on others’ properties
  • An environment where your employees use heavy equipment or interact with machinery

Because umbrella insurance works as extra coverage on top of another business owner’s policy, it is mostly used to pay for costs that exceed your main business coverage. Lawsuits brought by customers who slip and fall in your building or costs associated with an employee who is severely injured on the job could exceed the limits of your underlying policy and the amount of cash you have on hand.

If your employees use vehicles in their work, owned by either your business or the employee, an accident could become costly. Other high-risk situations include manufacturing or any other inherently dangerous business. If your company has expensive liabilities, you’ll want commercial umbrella insurance to protect you financially in the event of a loss or lawsuit.

How much business umbrella insurance do you need?

Umbrella insurance is a vital part of any successful business operation. Your insurance agent can help you determine the source and amount of liability inherent in your business, and together you can build the right umbrella coverage to protect your greatest asset and give you peace of mind.

Learn More About Business Umbrella Insurance From Main Street America

To purchase an umbrella insurance policy, you first need to find an agent near you. A Main Street America independent agent will help you identify the exposed liability in your business and recommend the business umbrella policy that is right for you.