3 Things You Need to Know About Umbrella Insurance for Business

what is umbrella insurance

Your company’s general liability policy outlines the maximum amount your insurance company will pay against a liability claim. As a result, if your business is sued for $1,250,000 for medical costs associated with an injury caused by a worksite or product hazard, but your general liability coverage caps out at $1,000,000, your business will be responsible for paying the $250,000 difference.  Fortunately, most general liability policies provide defense costs coverage outside of, and in addition to, the limit.

If, while working with your trusted broker, you judge your company your exposure to be greater than $1 Million (Which is not a lot of money today), you can add umbrella liability coverage to increase the depth of your coverage beyond the amount your underlying liability policies will pay out.

3 Things to Know About Umbrella Insurance for Business

#1 – Umbrella policies can provide broader coverage as well.

Unlike excess policies, which are normally “following form” policies mirroring the coverage of the underlying policy while adding their own excess limit, umbrella policies provide broader coverage beyond the underlying policy.  An umbrella policy can lack exclusions used in the underlying policy. Thus, an umbrella policy may cover certain risks from the first dollar of loss or liability incurred, which is not covered by the underlying policy. For risks left uncovered by the underlying policy but are covered under the umbrella policy, the umbrella policy is said to “drop down” to cover these risks as primary insurance and fill in the gaps in the underlying policy. Hence, the term “umbrella” refers to the broader coverage of the policy.

See also: How Liability Insurance Protects Your Business

#2 – Umbrella policies protect against catastrophic losses

Umbrella policies are often designed to protect organizations against catastrophic loss. The heightened tendency of individuals to sue for redress of perceived or actual wrongs, along with the large size of settlements, adds urgency to the addition of umbrella insurance to an underlying policy.

#3 – But umbrella policies don’t cover damage to your property, in the event of a fire, flood, earthquake etc.

Umbrella insurance does not cover your property. It will only cover property damage and bodily injury  your business causes to a third party.

Contact us below to have a KMRD expert identify all your umbrella coverage gaps.

KMRD is a strategic partner and outsourced risk manager ready to help companies proactively control the cost of risk and implement the right risk control techniques to strengthen each business. Our team has the proven industry experience to understand specific challenges and provide objective advice. We help manage risk through insurance and risk programs backed by our disciplined approach, proven processes, dedicated service team, and our collaborative risk management portal.

How KMRD Can Help:

KMRD delivers risk management and human capital solutions to over 600 clients nationwide. Our award-winning team, disciplined approach, proven processes, combined with our risk management portal make KMRD the leading choice to improve general liability protection and reduce the overall cost of risk.


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Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from a KMRD risk professional before taking any action.


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