Commercial Umbrella Insurance 101: What It Is & How It Works

Posted February 24, 2025

One in nine small businesses experience a lawsuit at some point. On average, large corporations are involved in over 100 lawsuits simultaneously. These sobering stats surface an opportunity for businesses to fortify their financial future with gap coverage, a solution that increases policy limits beyond your general liability insurance. That’s where commercial umbrella insurance comes in.

WHAT IS COMMERCIAL UMBRELLA INSURANCE?

Each business insurance policy has set coverage limits based on risks, specific circumstances, and criteria outlined in the underwriting process. We frequently recommend commercial umbrella insurance to our partners to fill coverage gaps that could exceed their primary policy limits.

Commercial umbrella insurance is best thought of as an additional layer of coverage that kicks in once the limits of your primary policy have been reached. In this case, the gap coverage acts as an umbrella covering the underlying policy, whether it’s by supporting a commercial liability plan, business auto insurance, or other professional needs.

HOW COMMERCIAL UMBRELLA INSURANCE WORKS

Commercial umbrella insurance acts as a safety net that catches expenses your standard policy can’t handle, so it’s essential to protect your assets from unexpected claims and lawsuits.

For instance, if an employee gets into an accident while using a company vehicle that results in a $250,000 lawsuit, but your base policy only covers $175,000, umbrella insurance may reimburse your company for the remaining $75,000.

WHAT DOES COMMERCIAL UMBRELLA INSURANCE COVER?

Remember, this insurance supports the underlying plan by extending the benefits beyond standard business policy limits. However, depending on the product and insurance partner, it may also provide additional coverage for events not listed.

WHAT’S COVERED BY A COMMERCIAL INSURANCE UMBRELLA

Business liability claims: Legal costs and damages from customer injuries or property damage on your premises
Product liability claims: Covers injuries or damages caused by your products to customers or their property
Employee and workplace injuries: Protection beyond workers’ compensation for workplace accident claims
Commercial auto accidents: Additional coverage for accidents involving company vehicles that exceed business auto policy limits
Advertising injuries: Claims involving copyright infringement, slander, or brand reputation damage
And other individualized risks: Coverage for unique exposures specific to your industry or business operations, such as cybercrimes and environmental issues

WHAT COMMERCIAL UMBRELLA INSURANCE DOESN’T COVER

In most cases, company gap insurance will only cover what it supports. If your underlying policy doesn’t cover specific exposures (like intentional crimes, damages, fraud, or errors and omissions), your umbrella policy won’t cover them either.

Therefore, the best way to maximize coverage is by partnering with an experienced insurance agent who can close the gaps on your behalf.

SO, DOES YOUR BUSINESS NEED UMBRELLA COVERAGE?

Yes. In nearly every case, adding business umbrella coverage limits financial risks and enhances your insurance portfolio. Here are key questions we recommend answering on behalf of your organization to determine if gap insurance is right for you:

Do you have significant business assets that need protection?
Does your business involve frequent interaction with customers or the public?
Do you operate company vehicles or have employees who drive for work?
Are you in an industry with high liability risks or frequent lawsuits?
Do your clients require liability limits higher than your current coverage?
Is your business expanding into new markets or offering new products?
Would a significant lawsuit exceed your current policy limits?
Do you work in or near high-value properties where damage could be costly?

GET A FREE, CUSTOMIZED QUOTE FOR COMMERCIAL INSURANCE

Improving your insurance portfolio with gap insurance starts with partnering with a professional insurance team that understands your business and its needs. With decades of experience supporting companies of all sizes nationally, we are always eager and capable of developing a customized solution that covers your company’s future to your budget and conditions.

Ashley Barto