What Is Umbrella Insurance For Business?
- Extra protection when it matters most – Umbrella insurance helps safeguard your business from costly liability claims.
- Boost your coverage, protect your business – This policy fills coverage gaps and shields your company from large, unexpected claims.
Extend your business liability protection
Owning a business comes with excitement, control, and the thrill of making your own rules. But one unexpected accident could put everything at risk.
That’s where commercial umbrella insurance comes in. While both umbrella and excess liability policies provide extra coverage when a costly claim exceeds your primary policy limits, umbrella insurance offers broader protection across multiple policies.
Think of it as a financial safety net—an extra layer of coverage to help safeguard your business when the unexpected happens. Let’s explore what it covers, how much it costs, and whether it’s right for you.
What is commercial umbrella insurance?
Just like a personal umbrella policy provides extra coverage for individuals, commercial umbrella insurance gives businesses an added layer of financial protection. It extends the limits of your existing liability policies, stepping in when:
- A claim exceeds your primary policy limits.
- An unexpected event isn’t covered by your standard liability policy.
Most business liability policies cap out around $2 million, but umbrella coverage can extend limits to $15 million or more. While that might sound excessive, business claims—especially lawsuits—can quickly surpass standard coverage.
You can also customize your business owner’s policy (BOP) by adding excess liability or umbrella coverage. These supplemental policies help fill in gaps left by other liability insurance, covering additional risks and even reimbursing deductibles in some cases. An insurance professional can help you determine the best way to combine umbrella coverage with your BOP or other policies.[1]
If you're launching a new business or your company earns less than $5 million in annual revenue, a business owner’s policy (BOP) could be a smart choice. A BOP bundles essential coverages, including commercial property insurance, business liability protection, and income coverage, into a single, convenient policy. While some businesses may be excluded, restaurants, offices, retail stores, and many others with fewer than 100 employees often qualify.
What does umbrella insurance cover?
Running a business comes with risks, and even minor incidents can lead to costly claims. A commercial umbrella insurance policy provides extra coverage for medical expenses, property damage, and legal costs when a claim exceeds your primary policy limits. It can help protect your business in situations like:
- A box that falls off of a shelf and hits a customer.
- A company truck runs through a customer’s fence.
- A car accident involving a company vehicle and an injured third party.
- A team member sues the firm for wrongful termination.
- A customer sues because someone forgot to put out the “wet floor” sign, and that wet floor caused them to slip and fall.
Let’s take one example: If a heavy box falls and injures a customer, they could sue for $2 million in damages, but your general liability policy may only cover $1 million. Without an umbrella policy, your business would be responsible for the remaining amount.
Having umbrella coverage ensures you're protected from financial strain when the unexpected happens.
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Umbrella vs. small business insurance
Sometimes, a storm is too big for an umbrella to withstand. The same is true regarding insurance, and umbrella policies have some exclusions. In some cases, you’ll need other types of small business insurance. For example:
- Damage to your property? You’ll need commercial property insurance.
- Malpractice lawsuits? You’ll need a professional liability policy.
- Workers compensation claims? You need a specific policy to protect your team members.
If you’re worried about these situations being more than a once-in-a-million lightning strike, you’ll want to browse additional coverage to protect your business. If you're looking for help, our friends at Bold Penguin can help get all your commercial insurance needs sorted.
Excess liability insurance can provide extra protection if a major claim exceeds your primary policy’s limits. It’s especially useful for businesses with higher liability risks, such as potential lawsuits or large claims. An insurance agent can help you assess whether this coverage—or an umbrella policy—better fits your needs.
How is the cost of umbrella insurance determined?
Several factors determine the cost of your commercial umbrella insurance, including:
- Your industry: Businesses with lower risk, such as professional services, typically pay less, while industries like manufacturing and construction face higher premiums.
- Coverage limits: Higher liability limits come with higher premiums.
- Business size: More locations, employees, or company vehicles generally mean higher costs.
- Number of policies covered: The more policies your umbrella insurance covers, the more you'll pay.
- Existing coverage levels: If your primary policies already have high coverage limits, you may need less umbrella insurance, reducing your premium.
In some cases, purchasing an umbrella policy can be a more cost-effective way to increase coverage rather than raising limits on individual policies. The best way to determine your cost is to request a free quote from an insurance provider based on your business’s specific needs.
Cost and benefits
Commercial umbrella insurance is a cost-effective way to enhance your coverage. Despite high limits, premiums are relatively affordable—typically $500 to $1,000 per year, with $1 million policies often costing just a few hundred dollars annually. Additional coverage is available in $1 million increments.
Costs vary based on industry, business size, and risk exposure. To find the right fit for your needs and budget, consult an insurance professional—what works for a national retailer may not suit a small-town bakery.
Are excess liability coverage and umbrella coverage the same?
Excess liability and umbrella insurance are similar but not exactly the same. Both provide additional coverage beyond the limits of your primary policies, but they function differently:
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Excess Liability Insurance: Extends the limits of a specific underlying policy (e.g., general liability). It does not add new types of coverage—just more of what you already have.
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Umbrella Insurance: Provides broader protection by extending limits across multiple policies (e.g., general liability, commercial auto) and sometimes covers gaps that the underlying policies don’t.
| Feature | Excess Liability | Umbrella Insurance |
|---|---|---|
| Extends coverage limits | ✅ Yes | ✅ Yes |
| Covers multiple underlying policies | ❌ No (only extends one policy) | ✅ Yes (covers multiple policies) |
| Adds new types of coverage | ❌ No | ✅ Sometimes |
| More affordable than umbrella | ✅ Usually | ❌ No, but offers broader coverage |
Commercial Auto Insurance | The Zebra
Commercial auto policies provide liability and physical damage coverage for business-use vehicles. Read our guide to find out more about the different coverages available for your business vehicle.
What are examples of commercial umbrella claims?
So, let’s look at some examples of when you might need to use your commercial umbrella insurance. Here are four common scenarios — though the possibilities are endless!
Scenario 1: Multi-car accident involving a company vehicle
Car accident claims can be expensive. Any business that uses company cars should already have a commercial auto insurance policy in place (if your company doesn’t, now’s the time to get on it!). But if there’s a serious wreck, the policy might not cover the full extent of the damages.
Imagine it is the day before the Super Bowl, and a craft brewery's delivery truck is speeding down the highway trying to make all of its deliveries. The day is cold, and the road is slick with ice. The driver takes a sharp turn to exit, skids, spins, and hits three vehicles.
The accident was not the result of negligence, but the driver was still found to be at fault. The exposure is high, the legal expenses are enormous, and liability insurance policy limits have quickly run out. This is when the brewery’s umbrella liability policy covers the remaining damages.
Scenario 2: Product liability claim exceeding base coverage
You’re proud of the stellar products that your business produces. What keeps you up at night is the thought of a supply chain issue.
Problems with a product can lead to serious claims. Imagine a small crafting company that sells thousands of crafting sheers a month. Unfortunately, no one noticed that the popular sheers are missing a safety guard. Multiple people report injuries and, given the United States’ medical system, rack up hundreds of thousands in medical expenses. To make matters worse, many individuals must stop working because of their injuries.
It’s easy to see how this claim could max out a company’s base liability limits. Umbrella insurance would provide the necessary additional coverage limits needed.
Scenario 3: Employee actions resulting in high damages
You might assume that most of your employees have their own personal insurance policies. But when these workers are on the clock and they’re negligent, their employer is always at least partially liable.
Take, for example, an advertising agency that works with multiple magazines. All is normal until one of the agency’s employees slanders the competition in an article in one of those magazines. The article results in severe reputational damage and financial loss for the competing company.
The employee doesn’t have professional liability coverage, and even if they did, the damages could run in the millions. Commercial umbrella insurance could help pay out the remaining expenses.
Scenario 4: Exceeding liability in a lawsuit
The words "liability" and "lawsuit" can strike fear in any business owner. That’s why preparing for the unexpected is crucial.
Imagine a business facing a serious accident—a workplace incident, a hazardous product malfunction, or a service-related mishap—leading to severe injuries, property damage, or even loss of life. The resulting lawsuit, medical expenses, and legal fees quickly surpass the company's standard liability coverage limits, leaving it on the hook for millions in damages.
Thankfully, the business can cover the remaining costs with commercial umbrella insurance, avoiding financial devastation. Instead of shutting down, it can focus on improving safety measures and continuing operations.
This protection can mean the difference between recovering from a crisis or losing everything.
You may save on commercial umbrella insurance by bundling it with other policies. A Business Owner’s Policy (BOP) combines general liability, property, and business interruption coverage, ideal for small businesses. A Commercial Package Policy (CPP) offers more flexibility, including cyber liability, commercial auto, and professional liability. While workers’ compensation is usually separate, some insurers offer discounts when bundled. Bundling helps reduce costs, minimize coverage gaps, and simplify policy management. Consult an insurance agent to find the best fit for your business.
Do you need umbrella insurance for your business?
That’s the million dollar question! While there’s no legal requirement, purchasing a policy can be wise — especially if your work involves risk. Take the following examples:
- If you own a hazardous operation like a construction or landscaping company. Your general liability policy may be inadequate if an inspector or customer takes a nasty fall onsite.
- If your firm uses company vehicles. One accident can quickly exhaust the limits of your commercial auto insurance policy.
- If your place of business has a large volume of foot traffic. More visitors mean an increased chance of injury on the premises. (However, even a home-based enterprise can face a costly lawsuit if a delivery driver gets hurt on the property.)
Beyond financial protection, umbrella liability insurance can give your business a competitive edge. Many customers value companies with strong coverage, and some may even require it before working with you.
It also provides peace of mind—and that’s something you can’t put a price on.
Which companies offer commercial umbrella insurance?
Not all insurers provide business or umbrella policies. According to the Insurance Information Institute, the companies listed below have been among the top commercial insurance providers in recent years, making them worth considering. It’s also a good idea to check with your current insurance company or agent to see if they offer business coverage. If they don’t, they may be able to refer you to a sister company or another reputable provider.[3]
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How to buy business insurance
Business owners need insurance, period. However, it's important to consider your options carefully. Here are the basic steps to get started with protecting your business:
- Assess risks – Identify potential threats like lawsuits, accidents, or property damage.
- Find an agent – Work with a licensed commercial insurance expert.
- Compare quotes – Shop multiple providers for the best coverage and rates.
- Review annually – Update your policy as your business grows.
Are you getting the best deal?
Insurance rates change over time, but comparing quotes helps you save on small business insurance. Bold Penguin specializes in commercial coverage, making it easy to compare multiple providers and find the right policy for your needs. Get a quote from Bold Penguin today.
Understanding business owners policies (BOPS). Insurance Information Institute
Get business insurance. U.S. Small Business Administration
Facts + Statistics: Commercial Lines. Insurance Information Institute