Umbrella insurance refers to a liability insurance policy that protects the assets and future income of the business above and beyond the standard limits set on the primary policies. However, it is important to note that Umbrella coverage may not apply to any Professional Liability Policy.
Typically, an umbrella policy is sold in increments of one million Dollars. The term “umbrella” is used because it covers liability claims from all policies underneath it, such as Business Owners Policy, Commercial Auto policies, Workers’ Compensation policy, etc.
For example, if you have a Business Owners policy with general liability limits of $1,000,000 and an Umbrella policy with limits of $4,000,000, your limits become in effect, $5,000,000 on any liability claim. Therefore, if you have a claim settlement for $2,600,000 and you have the Umbrella policy, you have enough coverage to cover the claim. However, if in this example you did not have an Umbrella Policy, your Business Owners Policy would exhaust its entire limit of $1,000,000 and your business is responsible to come up with the balance.
A typical commercial umbrella liability policy may offer features such as worldwide coverage; personal injury coverage; blanket contractual liability protection (for both written and oral agreements); care, custody, and control coverage; non-owned aircraft liability; watercraft liability; advertisers liability; liquor law liability; and an extension of protection to additional insureds.