Business Umbrella Insurance: Do I Need It?

Hoffman Hanono
April 17, 2023

If you’re a small business owner, you know the importance of business insurance. Depending on your industry, you might carry general liability insurance, commercial auto insurance, and other policies.

Unfortunately, in some instances, these policies aren’t enough to cover the cost of a claim. To protect your business from these situations, it’s often wise to get business umbrella insurance.

What Does Business Umbrella Insurance Cover?

Based on the name, you might assume business umbrella insurance covers everything. However, it simply covers many things that other business insurance policies do not. You can’t get a stand-alone umbrella policy — it sits on top of other policies to cover gaps in coverage.

Here are a few examples of things commonly covered by a business umbrella policy:

Claims Your Underlying Policies Don’t Cover

Covering claims that your existing policies don’t cover is a smart choice. For example, your existing policy may only cover damage to commercial buildings you own outright. If you get an umbrella policy, it may cover any rented buildings.

Claims that Go Beyond Your Policy Limit

In some cases, you may also run into a single claim whose costs exceed your policy limits. For example, if a claimant wins a $2 million lawsuit against you and your policy only covers up to $1 million, an umbrella policy would cover the rest.

Claims that Exceed Your Other Policies’ Aggregate Limit

Most business insurance policies have an aggregate limit, or the total amount of claim costs (including all claims) they will cover. If you’ve reached this limit through multiple smaller claims, an umbrella policy could cover additional claims.

Do I Need Business Umbrella Insurance?

Because there’s always a risk of claims and lawsuits, most businesses could benefit from an umbrella policy. These factors may indicate that getting an umbrella policy is especially important:

  • Your business has locations or properties that are open to the public
  • Your business performs work on other people’s property
  • The government or a customer requires you to have an umbrella policy to work on a given contract
  • Your business or industry makes you at especially high risk for a lawsuit

As you can see, most businesses fall into at least one of the above categories. However, if you run your own business, have no employees, and don’t interface directly with clients, you may not need an umbrella policy. For example, if you’re a web designer who works from home and only communicates with clients via email, umbrella insurance is probably not for you.

Protect Your Business with the Right Insurance

You’ve worked hard to build your business. Don’t let a claim or lawsuit destroy it! If you’re asking yourself, “Do I need business umbrella insurance?” The answer is probably yes.

At Hoffman Hanono Insurance, we can help you find the right business insurance for the right price. For over 50 years, we’ve worked with companies in Chula Vista and San Diego. We hope yours will be the next! Contact us today with any questions or to start the process of insuring your business.