If you run a business, you need to make sure that you protect yourself accordingly. There are a variety of different types of commercial insurance, including liability insurance and health insurance. But another type of small business insurance you need to consider is called umbrella insurance. 

As a business owner, you may encounter many unexpected incidents that can lead to legal disputes and lawsuits. While general liability insurance may cover most situations, there may be times when an umbrella insurance policy is needed. It’s important to understand what an umbrella policy is, what it can cover, and why your business may need this type of insurance coverage. Learn more about umbrella insurance for small businesses below, and reach out to a professional if you have questions.

What is an Umbrella Policy?

According to the Insurance Information Institute an umbrella policy is defined as a policy that covers above and beyond what your primary liability policy will cover. Umbrella insurance policies can be obtained for home, auto, or business. If you’re operating a business, this is a supplemental type of insurance that will provide extra protection for your business. An umbrella insurance policy is coverage that many small business owners may need in order to cover themselves adequately.

What Does an Umbrella Insurance Policy Cover?

Business Insurance Now states that an umbrella policy can add an extra layer of protection to your existing liability coverage. For example, if your general liability policy covers you for $1 million and a legal settlement is for $2 million, the umbrella insurance policy can cover the extra amount. Your umbrella policy may cover legal expenses even if you’re not found to be legally responsible for an incident.

An umbrella policy will provide added protection against property damage and physical injuries. Most insurance companies that provide umbrella insurance require that general policies be purchased before buying an umbrella insurance policy. This is because you generally must draw on your primary insurance policy first, before you can drawn on your umbrella insurance policy.

Why Would a Business Owner Need an Umbrella Insurance Policy?

Many people may believe that general liability insurance is enough to cover all their potential insurance needs. If you are sued for a large amount, however, general liability might not be enough to cover all your assets. Investopedia states that you probably need an umbrella policy even if you don’t have a lot of assets since future income may be garnished. A business might need to customize an umbrella policy to give more coverage to specific areas in their business. The following are some specific examples of when you may need to expand your coverage with an umbrella insurance policy.

• Delivery is a crucial aspect of your business but your auto policy only covers a limited area. An umbrella policy could expand the area for which you’re covered.
• If you operate a business in which the equipment you use is very expensive, you will probably want to customize an umbrella policy to cover any potential damage to that equipment.
• If your business regularly deals with clients, you will likely want to have an umbrella insurance policy to cover potential damage to those clients. This is especially true in cases where you are handling a client’s assets or the clients may be harmed in a way that prevents them from working or otherwise earning their normal income.

How much umbrella insurance should a business have?

The exact amount of umbrella insurance that a small business should carry depends on the industry. You need to think about the current policies you have in place, the dangers posed to your customers and employees, and the likelihood of damages exceeding the financial protection of your other policies. Generally, insurance policies range from $1 million to $15 million. They are usually sold in increments of $1 million, and you might want to speak to an insurance professional to ensure you have enough coverage.

Small business umbrella insurance: FAQs

What is not covered by a business umbrella policy?

Even though a business umbrella policy is typically very generous, this policy does not cover everything. For example, a commercial umbrella insurance policy might not cover some specific liability claims. It also doesn’t extend the limits of specific insurance policies, such as commercial property insurance. If you have a flood that impacts your business, the cost to repair your property may exceed the limits of your commercial property insurance policy. Your umbrella insurance policy generally does not cover property claims, so you would have to cover any damage exceeding the limits of your policy out of pocket. 

Is commercial umbrella insurance the same as general liability?

No, these are not the same thing. In general, your commercial umbrella insurance policy will cover things that your general liability insurance policy will not cover. That also means that if you suffer damages that exceed the limit of your general liability insurance policy, your commercial umbrella insurance policy will not cover excess damages. 

Who should purchase commercial umbrella insurance? 

If you believe that you need to protect yourself with additional coverage above and beyond traditional insurance policies, then it’s a good idea to get umbrella insurance. You can use this to supplement your other insurance policies and cover things that your general liability policy may not cover. If you believe there is a reasonable chance of your employees or customers getting hurt at your place of business, then you need to have an additional umbrella insurance policy. This policy can cover slip and fall injuries, commercial car accident liability, employee injury lawsuits, and even property damage lawsuits.

For example, if you want to sign a big client who requires more liability insurance, you own many vehicles, or if you believe you have a lot of contact with the public, then a general liability policy can help you. In addition, if your work is hazardous, you should have umbrella insurance to protect your employees in case they get hurt or injured.

Shop for Insurance Policies

As a business owner, you should generally try to find the best insurance policies available to cover the specific needs of your business.

If you are looking for health insurance, you are probably looking for a health insurance marketplace that provides an easy to navigate website that can compare premiums, eHealth’s site can provide a variety of plans. Contact eHealth for more information.