What Is Umbrella Insurance For Business And Do You Need it?

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What Is Umbrella Insurance For Business And Do You Need it?Hard hat representing the theme around umbrella insurance for business

What is Umbrella Insurance for Business?

Sadly, life isn’t always rainbows and sunny days. Sometimes the sky turns gray and all hell breaks loose. And while you can always duck indoors to keep from getting drenched, the same can’t be said for your business — unless you’ve purchased adequate insurance. Umbrella insurance for business, that is. 

Umbrella insurance can shield your company from stormy weather, but make note: it isn’t a standalone coverage option. Rather, these policies help to supplement the protection you may already have by offering coverage in the case that a claim exceeds a policy’s limit (whether in one shot or over multiple claims). It’s a bit like having a friend with an umbrella, who lets you share theirs when yours breaks. 

In this article, we’ll explore what umbrella insurance for business covers, how much it costs, and much more. That way, you can determine if this extra layer of protection meets your business needs.

What Does Umbrella Insurance Cover?

When it rains, it pours, and sometimes that downpour causes damage. Luckily, an umbrella insurance policy will pay for covered medical expenses, property damage that impacts a third party, and costs related to customer or employee lawsuits. It can also protect you from liability claims that arise due to crises both major and minor, including (for example!):

  • A box that falls off of a shelf and hits a customer.
  • A company truck that runs through a customer’s fence.
  • A car accident involving a company vehicle and an injured third party.
  • A team member who sues the firm for wrongful termination.
  • A customer who sues because someone forgot to put out the “wet floor” sign, and that wet floor caused them to slip and fall.

While these examples might seem specific, let’s consider one of them in more detail. Say a heavy box falls from the cloudy sky above (or off your store's top shelf) and strikes a customer in the head, resulting in bodily injury. The customer sues your business and wins two million dollars for medical bills, lost wages, and pain and suffering. 

Unfortunately, your commercial general liability insurance has a limit of one million dollars. Without an umbrella policy, you’d be in deep trouble. But with an umbrella policy, that extra coverage can help you pay the remaining balance. 

Pro Tip: Excess liability insurance may also be an appropriate solution for your company. Ask an insurance agent to help you assess which would be best for your business needs.

The Difference Between Umbrella and Small Business Insurance

Sometimes a storm is too big for an umbrella to withstand. The same is true when it comes to insurance, and there are some exclusions around umbrella policies. 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 keep your business well protected. If you're looking for help, our friends at Bold Penguin can help get all your commercial insurance needs sorted.

Pro Tip: Did you know you can also get umbrella insurance for your personal life? It can supplement the coverage of your home and auto insurance policies.

How Much Does Umbrella Insurance Generally Cost?

Generally speaking, a commercial umbrella policy with a $1,000,000 limit should cost you around a few hundred dollars per year. This price doesn't include additional coverage, which can be purchased in $1,000,000 increments. Of course, there are always factors that can impact what you pay.

Factors that Influence Umbrella Insurance Premiums

How you stay dry in the rain depends on a few factors, like your access to an umbrella or if you wore your favorite rain boots. The cost of your commercial umbrella insurance is also influenced by its own factors. These include but are not limited to:

  • The type of business you operate: Professional services tend to have lower rates, whereas industries like manufacturing and construction usually pay more due to the higher level of risk.
  • The amount of coverage you choose: If you want a higher liability limit, you'll need to pay a higher premium.
  • The number of sites, employees, and commercial vehicles your business has: Larger companies tend to pay a higher rate. 
  • The number of policies you put under the umbrella: The more policies, the more you pay. 
  • The amount of underlying coverage you have through your primary policies: If you already have a high coverage amount on your business policies, you won’t need to buy as much umbrella coverage. After all, you're already well covered! So that means you can get an umbrella policy with a lower premium amount as a small supplement to your existing policies.

Depending on the circumstances, it may be cheaper to augment your insurance protection by purchasing a business umbrella policy than by increasing coverage limits on your other policies.  But the best way to see how much umbrella insurance will cost your business is to contact an insurance company for a free quote — or get a few quotes in one convenient online hub when you use the Marble app

Pro Tip: You may save money on commercial umbrella insurance by bundling it with other policies.

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.)

In addition, having an umbrella liability insurance policy may also make your company more competitive in the market. Many potential customers will be glad to learn that your business has coverage, and some may even require the coverage before agreeing to do business with you. 

Umbrella insurance may also help you rest easy, which, at the end of the day, is priceless. 

Pro Tip: If you’re just starting a business or your company generates less than five million dollars in revenue annually, you may want to consider a business owner policy (BOP). A BOP is a pre-packaged insurance product that provides commercial property insurance, business liability coverage, and income protection.

Make Sure Your Business is Protected with Marble

As a business owner, you need to make sure your company can weather anything, be it the metaphorical rain, shine, or hurricane. And commercial umbrella insurance can help. Check out the Marble Marketplace, where you can shop for quotes and compare policies, all through one simple app. Get started today to ensure your business is covered!