What is Business Umbrella Insurance, and Do You Need it?

A commercial umbrella insurance policy adds more coverage to any existing liability policies you have. It covers liability claims that go above your coverage limits. It’s additional liability protection.

What is Umbrella Insurance for Business?

This umbrella coverage covers small businesses the same way business liability insurance does. It covers costs like legal expenses, medical bills on injury claims…etc.

Commercial umbrella insurance isn’t a stand-alone product. It works with other liability coverage policies. Like general liability insurance.

Read More: Types of Business Insurance

Does My Business Need an Umbrella Policy?

Business needs an umbrella policy for additional coverage.

If the public goes on your commercial property.
If anyone you employ works on other people’s property.
If a government contract requires umbrella coverage, most do.

If your business might get sued. In other words, most can use this additional layer to cover the financial risk from lawsuits.

Why You Should Have Umbrella Insurance

Commercial umbrella insurance covers what other policies miss.

Here are five other reasons why you need this extra liability coverage.

Got lots of foot traffic? This covers liability risk.
Got lots of vehicles? An umbrella policy offers auto insurance.
Use dangerous equipment? Umbrella policies cover employees’ severe injury claims, it is great for construction businesses.
Need to land a big contract? Extra coverage through an umbrella insurance policy helps satisfy bigger clients.
Is a lawsuit escalating? An umbrella insurance policy steps in when you exceed your coverage limits.

What is Covered by Business Umbrella Insurance?

A commercial umbrella policy needs to be comprehensive. Look through these different types of business insurance for reference.

Read More: Business Insurance Benefits

A business should check to be sure it has the following:

Liability Coverage

Get commercial umbrella insurance cover for legal issues that crop up. These insurance policies handle liability claims for property damages or injuries. Umbrella policies expand the liability limits offered with a general liability policy.

Global Coverage

This is the kind of liability coverage a small business needs when it works online. When a business interacts with global customers, an existing underlying policy might not be enough.

A commercial umbrella policy can fill the gaps. If you can’t get this kind of liability protection where you are, other insurance companies might have it. Ask around to avoid worst-case scenarios.

Property Damage

One of the other options is to add financial protection. A policy that covers business equipment or other items your business owns. An umbrella insurance policy here is divided into loss of use or bodily injury categories.

Medical Expenses

An expansion of your other liability insurance policy covers medical expenses if your small business is up against a bodily injury claim.

Those are a few of the boxes to check when you’re looking at commercial umbrella insurance options. Ask the insurance company you’re thinking of what you’ll need specifically.

What is Not Covered by Umbrella Insurance for Business?

Commercial umbrella insurance supplies coverage to look after business operations when you’re located on someone else’s property. But any small business insurance policy won’t cover everything. These professional services are no exception.

Here’s a list of what a commercial umbrella policy doesn’t have.

Claims Above Your Commercial Umbrella Insurance Limits

Every commercial umbrella policy has limits. Your small business will need to foot the bill for property insurance claims or others if you surpass them. Check with the insurance company you are thinking about using.

Errors and Omissions

Mistakes and oversights aren’t generally covered by this type of legal liability insurance. It’s a good idea to have a little cash reserve in addition to a business umbrella insurance policy.


If you or one of your employees breaks the law, a commercial umbrella insurance policy won’t cover you.

Property You Own

Property damage usually isn’t covered under commercial umbrella insurance. You will need to rely on property insurance to cover damages, especially if you own the property.

Your Business, If You Don’t Have Proper Underlying Policies

You need to have general liability insurance to act as a bedrock for all the other umbrella liability policies. That kind of underlying coverage is a must-have.

Commercial Umbrella Insurance Cost

One of the bottom lines for a small business is the commercial umbrella insurance policies’ cost. Off the top, this kind of liability insurance with 1 million dollars in coverage costs just a couple hundred dollars a year.

Remember commercial umbrella insurance doesn’t work by itself. It needs to piggyback on other liability insurance policies. For example, umbrella insurance cost depends on what you pay for other liability insurance.

According to HowMuch.net, there is a low-end and high-end involved. The high-end applies to the construction industry as well as doctors and lawyers. It will run you about $2500 a year and up. The low-end for this type of insurance costs as little as $200-$400 a year. That can include self-employed people who need low liability.

How to Choose the Right Umbrella Insurance for Small Business

For many businesses, it comes down to choosing the right indemnity company.

Here are five ways that you can choose a commercial umbrella policy that’s right for your business.

Decide on Your Risk

The amount of commercial umbrella insurance you’ll need depends on your industry. Computer stores and gun shops as well as anything in the construction and mining industries qualifies as high risk.

The higher the risk the more commercial umbrella insurance you’ll need.

Check Your Net Worth

Generally, you should have commercial umbrella insurance that equals your net worth.

Ask About Bundles

Ask any insurance company you are considering about bundling these policies. Remember you need an underlying policy to start with.

Check Self-Insured Retention

Make sure to ask the insurance company about this. It’s the amount you need to pay before the policy kicks in.

Make Sure You’re Getting An Umbrella Policy

Make sure to get what you’re paying for from the insurance company that draws up these policies.  Some call it an umbrella policy when it’s something else. Terms are different depending on the insurance company you use.

Best Umbrella Insurance Providers for Small Businesses

Choosing the best insurance company is about more than just looking to save money. Here’s a list of some of the best in the industry.

1. Travelers

Lots of different options. Like auto liability coverage for businesses with employees who drive on the clock. Good for SMBs having a hard time getting a business umbrella policy.

2. Allstate

Medical expenses from bodily injury claims are covered. This indemnity company advertises the cheapest rates. Coverage over existing auto insurance is available.

3. Liberty Mutual

Additional coverage is available for business use that expands existing auto insurance. Offers coverage from $1 million up to $100 million for an accident involving the policyholder’s own cars is covered.


Need to have one of their car insurance policies to get umbrella insurance. Aggregate limits are tied to the $5 million policy limits.

6. Geico

This is the best insurance company to deal with when you’re looking to bundle policies. It takes just a few minutes to get started with them.

Is it worth having an umbrella policy?

Yes, because they widen your safety net as a business. Otherwise, something like an injured customer can incur huge medical expenses. Having a commercial auto insurance policy covers traveling sales teams. Restaurants get important coverage for product liability. This insurance adds a layer of protection. Remember you are covered even when your employees rent a space to work in.

How do commercial umbrella limits work?

These policies act like a backstop protecting businesses from claims above other policy limits. The qualifying financial loss is the benchmark for this insurance to kick in.

Most kick in when you reach these thresholds. This type of insurance supplies an extra layer of protection for your small business. Commercial umbrella insurance works by giving you peace of mind for the unexpected.

Does umbrella insurance cover sole proprietorship?

A policy like commercial auto insurance for sole proprietors becomes important as they grow. Adding to a general liability insurance policy is a good idea too. Don’t forget to look into a bedrock, business owner’s policy.

It’s always a good idea to have this type of insurance to cover your business. It doesn’t matter whether you are a sole proprietor or a bigger enterprise. An umbrella policy can protect a sole proprietor from defamation and customer lawsuits. The right additions can replace damaged or lost business property, and even adds income replacement.

Sole proprietors should also include errors and omissions insurance as they grow. This can cover you for data breaches, missed deadlines, and incomplete work.

What is the difference between umbrella insurance and general liability insurance?

General liability insurance covers your business in a number of different scenarios. Your business is kept safe from claims for bodily and personal injury and others. Umbrella-type policies cover you from costly claims when you’ve reached the limits of the other ones.

Your situation will change when you start hiring employees. Then, you will be legally required to find workman’s compensation insurance coverage. This can help your company pay for work-related injuries and illnesses like ongoing care and medical bills.

Overall a policy like this covers defense costs if you find yourself in a lawsuit.

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This article, “What is Business Umbrella Insurance, and Do You Need it?” was first published on Small Business Trends