What is it?
Who needs it?
What is Commercial Umbrella Insurance?
California businesses are commonly exposed to many risks, including some sizeable liability ones. Should a liability lawsuit exceed a business’s primary insurance policy, commercial umbrella insurance might provide additional coverage.
Commercial umbrella insurance acts as supplemental liability insurance, usually providing coverage when an underlying primary policy’s limit is reached. As a supplemental insurance, the coverage is sometimes called “secondary insurance.”
What California businesses should carry Commercial Umbrella Coverage?
Many businesses in California may want the supplemental protection that commercial umbrella coverage can provide. Few businesses are immune from liability claims and lawsuits, and the legal fees and settlement associated with a lawsuit could become enough to surpass a primary insurance’s limits. Without secondary insurance, this could be financially devastating.
A few types of businesses that may want commercial umbrella coverage include:
- Large Corporations: Often have substantial risk exposure and/or be targets for lawsuits
- Small Businesses: Often have limited funds available for fighting liability lawsuits
- Asset-Heavy Businesses: Often can be targets of opportunistic lawsuits
- High-Risk Businesses: Often have substantial risk exposure due to activities/products
These categories might include nationwide businesses, solo-practice professionals, real estate investment firms and adventure tour companies, in addition to many others. Nonprofits and governments may also want the coverage, for they too can face liability lawsuits.
How are Commercial Umbrella Coverage and Excess Liability Coverage different?
Commercial umbrella coverage and excess liability coverage are two types of secondary insurance that businesses might use to protect against expensive lawsuits. A couple of important distinctions differentiate between the two coverages, though.
Commercial umbrella policies are typically underwritten with their own terms, conditions, exceptions and limits. Having their own terms generally allows these policies to supplement more than one underlying policy simultaneously, and it can also allow a commercial umbrella policy to fill in coverage gaps that underlying policies have.
Excess liability policies are typically underwritten with their own limits only, usually adopting the terms, conditions and exceptions of an underlying policy. This generally keeps excess liability policies to extending coverage for only one underlying policy, and the excess liability often can’t fill in any gaps.
Both commercial umbrella and excess liability have their place within insurance. For businesses that require multiple supplemental protections, however, commercial umbrella tends to be preferable.
What are self-insured retentions found in Commercial Umbrella Policies’ terms?
Many commercial umbrella policies have self-insured retentions, particularly when a policy is filling in coverage gaps. Businesses generally must pay a retention before the commercial umbrella policy begins providing coverage. Thus, a business is essentially self-insuring the first portion of a coverage gap since there’s no primary policy that offers protection.
An insurance broker who specializes in commercial umbrella coverage can help businesses make sure they’re able to manage any self-insured retentions that a chosen commercial umbrella policy has.
How can California businesses get Commercial Umbrella Insurance?
For assistance with commercial umbrella insurance, contact the independent insurance brokers at Heffernan Walton Insurance. Our brokers are highly familiar with this coverage, and they’ve worked with many California businesses. We’ll make sure you find a commercial umbrella policy that protects your business well.