Commercial umbrella insurance, also referred to as excess liability, provides coverage when a liability claim goes above the aggregate limit of liability and the basic policy limits are exhausted. By purchasing a commercial umbrella, you can protect your business from being liable for this excess liability in a judgement. For instance, if you have $1 million in general liability coverage and a covered claim is settled for $1.5 million, your small business’s umbrella liability insurance policy would pick up the additional amount.
Commercial automobile, commercial general liability, workers compensation, or any other liability policies can be covered by a commercial umbrella.
Not only does an umbrella cover underlying insurance policies, but they may also provide coverage if a basic liability policy is not in force or when there are gaps in coverage under basic liability policies. When a commercial umbrella needs to step up and provide coverage for basic liability loss, it does not pay the loss from the first dollar. It’s common to have a Self-Insured Retention (SIR) amount of at least $10,000. SIR is the equivalent to a deductible. That means if there is a liability claim or loss and no corresponding underlying policy in force, you must pay the first $10,000 of the loss before the umbrella policy responds.
Commercial umbrella policies are typically purchased in $1M increments. The premiums vary depending on your business classification and underlying policies. Policies are often inexpensive considering the added coverage a business gains. For everyday businesses with average risk exposures, umbrella premiums are usually in the ballpark of $400-$600 annually for each $1M purchased.
You can never go wrong purchasing a commercial umbrella policy for your small business. A single umbrella provides broadened protection over all your small business liability exposures. Having the added protection of a liability umbrella policy is coverage no small business should go without.
When you see the term “aggregate” on an insurance quote or policy, it is a limit stipulating the most an insurance carrier will pay for all covered losses sustained during an insurance policy term, usually a policy year. Aggregate limits are commonly included in liability policies, from general liability to professional liability. These policies have a “per occurrence” or a “per claim” limit as well.
When you look at your policy form, the liability section is laid out something like this:
|BUSINESS LIABILITY||LIMITS OF INSURANCE|
|LIABILITY AND MEDICAL EXPENSES||$1,000,000|
|MEDICAL EXPENSES – ANY ONE PERSON||$10,000|
|PERSONAL AND ADVERTISING INJURY||$1,000,000|
|DAMAGES TO PREMISES RENTED TO YOU||$300,000|
|PRODUCTS-COMPLETED OPERATIONS AGGREGATE||$2,000,000|
The per occurence limit is the most the carrier will pay per occurence, and the aggregate is the most they’ll pay in claims during the policy period regardless of the number of claims.