Don't Risk IT

Commercial Umbrella Insurance: Do I Need It?

Monday, March 24, 2014/Categories: technology-insurance

More than just insurance “for a rainy day,” umbrella insurance is so named because it acts like an umbrella, adding additional coverage amounts over certain underlying policies. Also called “excess liability insurance,” umbrella liability insurance gives your company higher coverage limits when a claim exceeds a specific underlying policy’s limits.

IT business owners can add a commercial umbrella policy to their general liability policy, hired and non-owned auto liability insurance, and the employer’s liability coverage that comes with workers’ comp insurance. One important thing to keep in mind, however: Umbrella insurance does not apply to professional liability insurance, also known as errors and omissions or E&O coverage.

What Is Umbrella Insurance, and What Does an Excess Policy Cover?

Let’s say that one of your employees is driving to a client site in a rental car and is involved in a vehicle accident that injures passengers in the other vehicle. Your business gets sued for $1.5 million, and a court orders you to pay up. Your hired and non-owned auto policy’s limit is just $1 million. Where are you going to come up with another $500,000? If you have an umbrella policy with that coverage, that half-million is covered.

In addition to court-ordered settlements, umbrella coverage also pays for legal costs and eligible out-of-court settlements. So, if one of your employees accidentally injures someone while working on a client site, and you’re sued but your general liability insurer helps you settle out of court, umbrella insurance coverage could pay for any legal fees or settlement costs beyond the limits of your general liability policy.

If you’re thinking that adding an umbrella policy is a luxury that would be prohibitively expensive, you’d be mistaken. Umbrella coverage is typically sold in increments of $1 million, and you can usually add coverage starting at just a few hundred dollars a year. Many small business are discovering that they can get a lot of extra protection for a small amount of money.

Who Needs an Umbrella Policy?

Many IT contracts require umbrella insurance to ensure that the money will be there to cover a large claim if anything should go wrong. But beyond that, who should have an excess insurance policy? What other things should you think about when determining if you need to add umbrella coverage?

Here are some questions to think about:

  • Do your employees either drive a company vehicle or use their personal vehicle on company business? If so, an accident in which people are injured or killed could result in a lawsuit award that would exceed the limits of your commercial auto or hired and non-owned auto coverage.
  • Do your clients visit your place of work? If an accident were to happen on-site, a large claim could jeopardize the future of your business.
  • Do you worry about liability? If you tend to lose sleep thinking about worst-case scenarios, a few hundred dollars a year for excess insurance is a small price to pay for peace of mind.

Get Covered

To make coordination of benefits easier, it may be best to purchase your excess policy from the same agent who handles your underlying business insurance policies. For a free rate quote for umbrella insurance, as well as any other type of coverage for your business, contact the IT insurance experts at

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