What Is Umbrella Insurance For Business? A Complete Review

Umbrella insurance offers additional protection for businesses by extending coverage beyond the limits of their liability insurance.

In the event that a customer files a lawsuit and the awarded damages surpass the liability coverage limits, the umbrella policy becomes instrumental in bridging the gap.

This supplementary policy is designed to address various expenses, including legal fees, settlements, judgments, medical expenses, and property damage costs.

Essentially, it serves as a safeguard for out-of-pocket expenditures that a company may incur once its primary liability insurance coverage is exhausted.

What Is Umbrella Insurance For Business?
Image source (Canva)

What Does Business Umbrella Insurance Cover?

Business umbrella policy provides coverage for expenses related to bodily injury, property damage, and legal costs arising from employee or customer lawsuits tied to your business.

It kicks in when claims surpass the limits of your existing policies or when the aggregate total exceeds your current liability coverage.

Additionally, it extends coverage to rented equipment not covered by your general liability policy.

What Are the Benefits of Commercial Umbrella Insurance?

Umbrella insurance goes beyond basic coverage limits, ensuring your business is protected from lawsuit costs exceeding general liability or commercial auto insurance limits.

It’s especially beneficial for tech companies needing high insurance levels in contracts, meeting requirements at a lower cost than increasing general liability insurance limits.

What Are the Drawbacks of Commercial Umbrella Insurance?

Commercial umbrella insurance may be affordable, but small businesses with narrow budgets may find it burdensome.

Some owners hesitate to pay for non-mandatory coverage they may not use.

Despite this, some businesses value the peace of mind it provides.

Determining the necessary coverage and providing required information can be labor-intensive.

Additionally, a catastrophic accident may still surpass the limits of the umbrella policy.

What Types of Businesses Should Have Umbrella Insurance?

Business umbrella insurance adds an extra layer of liability protection above existing policies, extending coverage beyond their limits
Business umbrella insurance adds an extra layer of liability protection above existing policies, extending coverage beyond their limits: Photo source (Canva)

Businesses, especially those at high risk of litigation or with client interactions, benefit from umbrella insurance.

It’s crucial for companies with brick-and-mortar locations, tech-based businesses, government contractors, and those handling hazardous materials.

Clients may require vendors to carry umbrella policies, and it’s advisable for businesses with commercial vehicles.

Sole proprietorships without direct client interactions may be exceptions not needing umbrella protection.

How Much Does Business Umbrella Insurance Cost?

Business umbrella coverage can cost anywhere from about $40 to $100 per month for $1 million in coverage.

The rates vary depending on the inherent risks involved in your business.

For example, manufacturing and construction companies tend to see higher premiums for business umbrella insurance.

Your company must carry a specified amount of commercial general liability or commercial auto insurance to qualify for business umbrella insurance.

Read more: How to check if a business has insurance 

Key Takeaways

  • Business umbrella insurance covers claims that exceed the limits of a company‚Äôs already-existing commercial liability or commercial auto insurance.
  • Most businesses can benefit from business umbrella insurance, which is especially important for businesses at high risk of lawsuits.
  • Business umbrella coverage is relatively inexpensive.

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