What does umbrella insurance cover?
If any incident covered by your general liability, employer's liability (part of workers’ compensation), or hired and non-owned auto insurance exceeds your policy limit, commercial umbrella insurance covers the extra costs.
Umbrella insurance increases coverage for:
Third-party bodily injury
When you add commercial umbrella insurance (or excess liability insurance) to a general liability policy, it helps pay for medical expenses or legal expenses if someone injures themselves on your business’s property.
Example: A client trips on an uneven step in a digital marketing agency and sustains serious injuries that leave her with a chronic health problem.
To recoup the cost of medical expenses, she decides to sue the agency for millions of dollars in damages. Umbrella insurance helps the agency pay for the damages.
Car accident liabilities
When you add commercial umbrella insurance to hired and non-owned auto insurance (HNOA), it helps cover the cost of medical bills and legal expenses resulting from a traffic collision.
Example: On the way to deliver goods to a client, a computer repair technician driving a company car causes a pile-up. The other drivers sue for compensation that totals more than a million dollars.
In this situation, a commercial umbrella policy can cover medical expenses, the cost of hiring an attorney, and the amount judged fair for damages.
Employee injuries
When you add commercial umbrella insurance to employer's liability insurance (included in workers' compensation insurance), it boosts your protection if an employee blames you for an injury or illness.
Example: A long-time employee at a web design company sues his employer over a chronic, work-related health problem that cost him more than $1 million dollars in hospital stays and physical therapy.
In this situation, an umbrella policy can cover the company's legal expenses, including a court-ordered judgment or a settlement.
Lawsuits over third-party property damage
When you add umbrella insurance to a general liability policy, it helps cover the cost of lawsuits related to damaged property.
Example: A telecommunications supplier accidentally backs a company van into a client’s warehouse, destroying inventory and causing millions of dollars in damages. The client sues for damages.
In this situation, a commercial umbrella policy can cover the supplier's legal expenses and damages.
Umbrella liability insurance does not cover:
Professional errors
Errors and omissions insurance (E&O) can cover lawsuits over professional mistakes, including undelivered services and missed deadlines. You can buy a policy called excess liability insurance, or excess E&O, to boost your E&O limits.
Example: A mobile app developer misses a deadline, forcing the client to postpone launching their new software. The client sues the developer to recoup the revenue lost due to the delay. The developer’s E&O policy covers the bulk of the legal costs, and the rest are paid for by the developer's excess E&O policy.
Amounts within the underlying policy's limits
Though umbrella insurance boosts the protection of an existing liability policy, it only kicks in when the limits on the underlying policy are exceeded.
Example: A client at an IT project management company slips in the office and breaks a leg. The resulting lawsuit leads to $800,000 in legal expenses, which is within the limits of the company's general liability policy.
Though the company purchased umbrella insurance, it did not become active in this instance.
Business property damage
Umbrella insurance boosts the coverage of liability policies only. Commercial property insurance, included in a business owner's policy (BOP), can help pay for expenses to repair or replace your business property when it's damaged by fire, theft, and some weather-related events.
Example: A thief breaks into a software development company and steals computers and other valuable equipment. Commercial property insurance can help pay to replace the stolen items and make necessary repairs.