Businesses and wage earners need an umbrella policy, also called an excess liability policy. These policies kick in when your primary personal or business liability policy limits are exhausted.
First, let’s look at excess commercial liability insurance. These policies protect your business and its employees from legal liability beyond the limits of your primary liability policies. They sit above commercial general liability, a Business Owner's Policy, business auto insurance, and employers liability coverage; for more details see Commercial Umbrella Insurance.
What a commercial umbrella does
- It continues to pay for legal liabilities, including defense costs, when the limits of underlying policies are met or exceeded.
- It takes over when an underlying policy’s limits are exhausted because of earlier claim payments.
- It can provide protection for certain liabilities not covered by underlying policies, typically subject to a self-insured retention by the named insured.
Uncovered incidents an umbrella may respond to
- Contractual liability (written and oral)
- Liquor law liability
- Non-owned aircraft liability
- Slander and libel
- Other specialized exposures
A comprehensive commercial umbrella plan can cover many potential exposures, including liability from customers visiting your premises, delivery drivers, contracted salespeople, and liability related to products you sell or produce. For a broader look at umbrella and excess options, see Umbrella and Excess Liability Insurance.
The greater the risks facing your business, the more important a commercial umbrella policy becomes. Schedule a meeting with your business insurance advisor to discuss whether you need umbrella coverage and how much is appropriate; you can also talk to your agent for a personalized review.
Personal umbrella coverage
Most homeowners and auto policies include liability limits, and a personal umbrella extends those limits. For a relatively modest annual premium you can add several million dollars of excess liability protection that kicks in after your homeowners or auto liability limits are exhausted.
Personal umbrella policies typically require minimum liability limits on underlying coverages (commonly $100,000/$300,000 for auto and similar for homeowners) and they also cover exposures like slander and libel that primary policies may exclude. For general information on excess and umbrella options, see Excess/Umbrella Liability Insurance.
When deciding how much personal umbrella insurance to buy, consider selecting limits at least equal to your net worth and review options with your personal insurance advisor.
Frequently Asked Questions
What is the main difference between an umbrella policy and my primary liability policy?
An umbrella policy provides excess limits above your primary policies and can cover certain liabilities that primary policies exclude.
When does umbrella coverage start to pay?
It starts to pay only after the limits of the appropriate underlying policy are exhausted or when an uncovered loss triggers the umbrella subject to any self-insured retention.
Does a personal umbrella cover business activities?
Personal umbrellas generally exclude most business liabilities, so businesses typically need a commercial umbrella policy for those exposures.
How much umbrella coverage should I buy?
Consider purchasing limits at least equal to your net worth and discuss specific exposures with your insurance advisor.