How an Umbrella Policy Works for Your Business


An umbrella policy can cover some liability risks that other coverages might miss or not cover. Every business has its share of liability risks; standard commercial liability coverage is sufficient for most of them. Unfortunately, some liability claims exceed the policy limits, leaving business owners at greater financial risk. An umbrella insurance policy can cover those losses. Understanding how umbrella coverage works can help you get the policy your business needs.

How Does an Umbrella Policy Work?

Umbrella policies extend additional liability coverage for losses that exceed your standard liability limits. If your company has a $250,000 liability limit and you face a liability claim in excess of $750,000, umbrella insurance can cover the additional $500,000. It protects your company’s assets from liquidation due to a substantial liability claim.

What Can Umbrella Policies Cover?

One advantage of a liability umbrella is the broad coverage. In many cases, commercial liability limits coverage to liabilities that occur on your company’s property. When investing in umbrella coverage, the policy typically extends beyond just your immediate property and offers widespread liability protection. For example, your liability umbrella would apply if an employee damages customer property during delivery.

In addition to property damage liability, most liability umbrellas also cover attorney’s fees for legal claims, libel, slander claims, and malicious prosecution. Your property & casualty agent will review the policy inclusions so that you understand your coverage.

What Will Your Liability Umbrella Exclude?

Liability umbrellas exclude coverage for your company’s property. Those losses fall under your commercial property policy. Most policies exclude liability claims resulting from deliberate actions and illegal activities.

Does Your Business Need a Liability Umbrella Policy?

Deciding if an umbrella policy is right for your business starts with considering the risk factors. Is your business a target for commercial liability litigation? High-value businesses, those with substantial assets, and companies with a high profile often make prime targets for litigation because of the potential for significant settlements. Consider your company’s actual financial exposure to decide if liability protection is beneficial.

How Is the Premium Determined for an Umbrella Policy?

Once you understand why your business should have an umbrella policy, you might wonder how your carrier determines the premiums. There are many factors contributing to the cost of liability umbrella coverage.

Your company’s industry is a factor. Companies in high-risk industries, including construction and electrical work, pay higher liability premiums. The size of the business is an essential consideration, as is the actual type of work that you do. Administrative businesses might face higher risks of libel or slander claims, while marketing firms may have higher premiums due to copyright concerns and discriminatory advertising risks.

Finally, the policy’s aggregate liability limit is essential. Premiums are higher for policies with higher coverage limits.

Every business owner should understand the fundamentals of a liability umbrella policy. When you see what these policies cover, it is easier to appreciate the financial safety net they offer for any potential liability risk. Even the most comprehensive security and safety measures can fail, so protect your company from costly liability risks.

About The Hilb Group

Deciding what coverage you need and what limits and deductibles make the most sense can be tricky. Founded in 2009, the Hilb Group has been helping clients to make sense of their options and make the smartest choices for their circumstances. Whether you need Warehouse Insurance or any other type of business or personal coverage, we encourage you to contact our friendly, experienced, and capable team today. Call us at (800) 776-3078 for a consultation.