What does a commercial umbrella sit over?

A commercial umbrella insurance policy, often referred to as excess liability coverage, plays a crucial role in a business’s risk management strategy. But what exactly does a commercial umbrella policy “sit over”? To understand this, it’s essential to grasp the fundamental purpose of a commercial umbrella policy and how it fits within the broader context of a business’s insurance coverage.

Primary Insurance Policies:

Commercial umbrella insurance is designed to sit over one or more primary insurance policies. These primary policies can include:

1. General Liability Insurance: This policy covers common business liabilities such as third-party bodily injury, property damage, and advertising injury.

2. Commercial Auto Insurance: It provides coverage for vehicles used for business purposes and can include both owned and non-owned vehicles.

3. Employer’s Liability Insurance: Part of workers’ compensation insurance, it covers claims related to employee injuries or illnesses not covered by workers’ comp.

4. Professional Liability Insurance: Also known as errors and omissions insurance, it covers claims related to professional errors or negligence in providing services.
   
   

Excess Coverage:

Commercial umbrella insurance is considered excess coverage because it provides an additional layer of protection above the limits of the primary policies. Here’s how it works:

• Let’s say you have a general liability insurance policy with a coverage limit of \$1 million.
• You experience a covered liability claim resulting in damages of $1.5 million.
• Your general liability policy would cover the first $1 million, and then your commercial umbrella policy would kick in to cover the remaining $500,000

Sitting Over Primary Policies:

The “sitting over” concept is analogous to an umbrella providing extra protection against the rain. In this case, your primary insurance policies act as the initial protection against various liabilities. If the limits of those policies are exhausted due to a significant claim, the commercial umbrella policy comes into play, sitting over them to provide additional coverage.

Benefits of a Commercial Umbrella Policy:

• Extended Coverage Limits: Commercial umbrella insurance extends the coverage limits of your primary policies, ensuring you’re adequately protected even in the face of high-dollar claims.

• Broader Coverage: It offers broader protection, addressing a wider range of liabilities that may not be covered by primary policies.

• Legal Defense Costs: Commercial umbrella insurance typically covers legal defense costs, which can be substantial in the event of a lawsuit.

• Protection Against Catastrophic Losses: It provides essential protection in situations where a catastrophic event leads to significant claims that could otherwise jeopardize your business.
  
  

In conclusion, a commercial umbrella insurance policy “sits over” your primary insurance policies, offering an extra layer of protection when your primary policy limits are exhausted. This additional coverage is crucial for businesses facing complex and high-risk liability scenarios, ensuring financial security and peace of mind.