Consider a Commercial Umbrella Policy

Posted March 21, 2025

Author – Brett Glowatski, Account Executive – Lancaster

In today’s complex insurance market, it can be difficult to navigate the total needs of your commercial insurance program. All businesses deal with general liability coverages, while most having some sort of property, automobile, and workers comp coverage as well. Outside of the basic needs, what can benefit your business to help the changing landscape of risk exposures? Having an additional liability policy, Commercial Umbrella, can ensure when those major issues arise, you will be covered.

A commercial umbrella insurance policy provides additional liability coverage for businesses beyond the limits of the primary policies they already have, such as general liability, auto liability, or employer’s liability insurance. It’s designed to protect a business from major claims or lawsuits that could exceed the limits of the basic policies. In essence, if your company faces a large liability claim, such as for property damage, bodily injury, or personal injury that surpasses the limits of your standard insurance, the commercial umbrella policy kicks in to cover the excess amount. This type of coverage can help safeguard business assets and prevent financial hardship from large, unforeseen liabilities.

When to Consider a Commercial Umbrella

  • Significant Assets
    • If your business owns valuable assets, or has substantial revenue, an umbrella policy can help protect those assets.
  • High Risk Activities
    • If your business operates in an industry where the potential for serious accidents is much greater, umbrella can provide additional security.
  • Catastrophic Events
    • A Commercial Umbrella is designed to cover catastrophic events, like a major lawsuit, injury, or accident involving one of your company vehicles.
  • Work With Clients or Partners Who Require It
    • Some clients, business partners, or landlords may require businesses to carry a certain level of liability insurance. An umbrella policy can help meet these requirements, while also providing assurance that your company can handle major claims.
  • Operate in Multiple Locations
    • With multiple employees, office locations, or a fleet of vehicles, there’s more potential for incidents to occur that could result in large liability claims.
  • Looking for Peace of Mind
    • Wanting the peace of mind knowing your business is protected from unexpected or potentially devastating lawsuits.
  • Legal Cost and Settlements
    • In a claim involving a lawsuit, the costs associated with that can be a financial burden. An Umbrella policy can help cover some, if not all those costs.

Determining Your Commercial Umbrella Limit

  • Current Insurance Limits
    • Review your current policy limits, the umbrella provides coverage above and beyond those limits.
  • Likely Scenarios in Your Industry
    • Review previous claims, whether in your business or industry, to understand the idea of what’s at stake
  • Evaluate Risk Tolerance
    • Decide whether you are more risk-averse than others. Do you mind assuming more risk, or rather mitigate and transfer those potential losses?
  • Review Business Financials
    • Having a good understanding of the assets your business has can be a great determining factor for an umbrella limit.
  • Nature of Business/Industry Standards
    • Businesses in industries like construction, manufacturing, healthcare, or retail might face higher liability risks due to the nature of their work.
  • Understand Legal and Contractual Requirements
    • If you have current contracts with clients, ensure that your current coverage meets those obligations.
  • Consult an Insurance Professional
    • An insurance broker can help assess your business’s specific needs and guide you in selecting the right umbrella coverage. They can also help you understand how your umbrella policy will integrate with your existing coverage.

Common Umbrella Limits

  • $1 Million
    • Appropriate for small to medium sized businesses.
  • $2 – $5 Million
    • Medium to larger businesses, higher risk profiles and assets.
  • $10 Million +
    • Large corporations or industries with a much higher risk

While a smaller umbrella limit may be sufficient for some businesses, others may require more substantial coverage depending on the risks involved. It’s essential to balance adequate protection with the costs of premiums and understand how your umbrella policy will work in conjunction with other policies to provide comprehensive coverage.

Protecting your assets and business is crucial for ensuring long-term financial stability and continuity. A well-rounded strategy involves both proactive planning and reactive protection. In any case, if you have contemplated adding an umbrella policy, or considered a review to see if it would be beneficial to your business, Horst Insurance can provide that service to you.