What Is a Commercial Umbrella Insurance Policy?
Commercial Umbrella Insurance, also known as Excess Liability Insurance, comes into play if a settlement against your business exceeds the limits of one of your underlying policies. As a small-business owner, you can purchase Commercial Umbrella Insurance in increments of $1 million to supplement your General Liability Insurance, Hired and Non-Owned Auto Liability Insurance, and Employer’s Liability Insurance policies.
How does it work? Let’s say a customer is seriously injured in a fall at your office and you owe $1.5 million for the settlement. You have a General Liability Insurance policy, but it only provides coverage up to $1 million. If you have a Commercial Umbrella Insurance policy, it should cover the remaining $500,000 you owe once your General Liability Insurance policy maxes out.
You can think of it kind of like insurance for your insurance.
Important to know: you cannot purchase Commercial Umbrella Insurance to supplement Professional Liability Insurance, also known as Errors and Omissions Insurance.
Do I Need Commercial Umbrella Insurance if I Work in a Low-Risk Industry?
Some small tech business owners think they don’t need Commercial Umbrella Insurance because tech work is typically not considered too risky. However, it’s important to remember that there is risk involved with running any business and accidents happen all the time. You just never know which accident might cost your business millions.
“Let’s say a small-business owner has an employee driving a company vehicle, that vehicle is involved in a serious car accident, and someone unfortunately dies,” says
Ed Patricoff, Jr.,
partner in the Miami office of the law firm
Shutts & Bowen LLP
(@ShuttsBowen). “A large claim is brought against the company and a judgment is made for $5 million. If the company does not have Umbrella Insurance coverage, that could, in theory, wipe out the company entirely.”
Another way to think about Umbrella Insurance is like hedging your bets. Most days the weather is fine and wearing clothes is the only real protection you need. But on a day when an unexpected thunderstorm strikes, having an umbrella can make a real difference – protecting you, and your no-doubt snappy ensemble, from the elements.
If you have more questions about the amount of coverage your IT business may need, read our article “How Much Business Liability Insurance Do I Need?”