Most companies have some level of liability for third-party injuries or property damage. Although IT companies may have fewer physical risks than more dangerous industries, it’s still important for them to protect themselves from lawsuits and damages. If your business is held liable for a major claim or multiple smaller claims in one year, you could exhaust the limits of your primary insurance coverage, leaving you responsible to pay for the remainder. This is where Commercial Umbrella Insurance can step in.

What is Commercial Umbrella Insurance?

Commercial Umbrella Insurance is a supplementary type of insurance that will financially protect your company after the limits of your primary liability policies have been exceeded. It can extend the coverage of your commercial general liability policy, commercial auto liability policy, or employers liability insurance policy. It can also provide coverage above more than one underlying liability policy. Since Commercial Umbrella Insurance only covers claims if your underlying insurance is exhausted, which is uncommon, Commercial Umbrella Insurance is typically more affordable per dollar of additional coverage than purchasing a higher limit of coverage on your primary policy.

Example:

• Your computer repair company has a fleet of vans. While driving a company van, your employee slides on ice and collides with another vehicle, severely injuring its driver. The other driver sues and is awarded $1.8 million in damages. Your commercial auto insurance policy has a combined single limit of $1 million. Your primary policy would pay for $1 million of the claim, after which it would reach its limit. Your Commercial Umbrella Insurance would pay the remaining $800,000.

What does Commercial Umbrella Insurance cover?

Commercial Umbrella Insurance extends the limits of your primary liability insurance policies. Typically, Commercial Umbrella Insurance will cover the same perils as the underlying policies. If your company suffers a number of claims or a particularly large settlement in one year, the costs may exceed the maximum amount your underlying insurance policy will cover. After the underlying coverage has been exhausted, your Commercial Umbrella Insurance will kick in to cover the remaining costs up to the Commercial Umbrella policy’s limit of insurance.

Additionally, if your company is involved in a lawsuit, Commercial Umbrella Insurance can cover some or all of your legal defense fees.

Example:

• Your server installation and maintenance company is at a client’s offices performing routine maintenance. One of your employees accidentally overloads a circuit, causing an electrical fire to break out. The fire spreads to neighboring offices, causing property damage valued at $2 million. Your CGL insurance has a limit of $1 million. Your Commercial Umbrella Insurance would cover the remaining $1 million.

It’s important to note that some Commercial Umbrella policies have additional exclusions that aren’t part of the underlying insurance, so you’ll need to work with your insurer to make sure you understand what is covered.

Drop-down Coverage

In addition to the perils covered by the primary insurance policies, Commercial Umbrella Insurance can provide some additional coverage for perils that may not be covered by underlying liability policies. This is called “drop-down” coverage because rather than beginning coverage after the underlying coverage has been exhausted, the Commercial Umbrella Insurance can “drop down” to cover a claim from the first dollar of loss.

Example:

• A repair person visits your web hosting company to perform repairs. While working on an uninterruptible power supply, he comes into contact with a leaky battery, which causes chemical burns. Your general liability policy does not cover bodily injury caused by pollutants. Your Commercial Umbrella Insurance policy does cover pollutants and therefore drops down to cover the liability.

Who needs Commercial Umbrella Insurance?

Not every IT professional will need Commercial Umbrella Insurance. For smaller firms with lower risks, like an app developer who works remotely and only interacts with clients online, there is likely no need for such expansive coverage. For those with elevated risks, however, Commercial Umbrella Insurance may be a wise choice. It’s a good idea to consider Commercial Umbrella coverage if any of the following applies to your IT company:

• Your company owns vehicles. Auto liability claims are common and can be very expensive.
• You install or work on technology at clients’ locations. There’s always a chance that your employees could accidentally damage your client’s valuable property while working.
• You have high-income clients. If your clients are injured, they could sue for lost income or damages, which could be costly.
• You own a storefront location, such as a computer repair store. The more customers visit your store, the more likely it is that one of them may be injured on your property and sue you.
• Your clients contractually require you to have higher liability insurance limits than your underlying policies.
• Your company owns significant assets that you wish to protect.

What’s the difference between Commercial Umbrella Insurance and excess liability insurance?

Commercial Umbrella Insurance and excess liability insurance are easy to confuse because they both raise the limits of your primary liability policies, and insurers often use the terms interchangeably. The exact definition of each policy can vary depending on the insurer, but there are generally accepted differences between the two. The main distinction is that Commercial Umbrella Insurance may offer broader coverage. In addition to extending the limits of the underlying liability policies, it can drop down to cover perils that aren’t included in any of your primary policies. This gives a wide range of additional coverage that can help fill gaps in your insurance. In contrast, excess liability insurance is a narrower coverage that extends the financial limits of primary liability policies but does not offer any additional coverage.

Does Commercial Umbrella Insurance have a deductible?

Commercial Umbrella Insurance does not typically have a deductible, but it may require a self-insured retention (SIR) for drop-down coverage claims. Since there is no underlying insurance policy that will provide coverage for drop-down claims, your umbrella insurer may require you to pay for a portion of the claim’s cost before beginning coverage. Unlike a deductible, the SIR is not typically subtracted from your limits of insurance. For example, if your limit of insurance is $1 million and your SIR is $10,000, you would still have $1 million of coverage remaining after paying the SIR.

How much does Commercial Umbrella Insurance cost?

The cost of Commercial Umbrella Insurance varies based on your industry, your business’s risk level, and the amount of coverage you wish to purchase. Small businesses may pay premiums ranging between $750 and $1,500 per year. Raising the limits of your insurance by adding a Commercial Umbrella policy is typically cheaper than raising the limits of your underlying policies.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer Commercial Umbrella Insurance:

Provider	Commercial Umbrella	General Liability	Professional Liability
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??

Final Word

Commercial Umbrella Insurance is a cost-effective way to add additional coverage to your primary liability policies. It extends the limits of your underlying policies and can even cover extra liability claims that aren’t covered under the primary policies. Many IT companies could benefit from this coverage, and it’s particularly important for those companies that operate vehicles, perform work at clients’ locations, or are frequently visited by the public. Commercial Umbrella Insurance can give you and your clients the confidence that your company would be protected even in the case of a major lawsuit or multiple claims that would exhaust the limits of underlying liability insurance.