Commercial umbrella insurance
Cheap, because it only engages after everything else.
A commercial umbrella sits above the liability limits on your other policies and responds once those have been exhausted.
It is generally inexpensive relative to the amount of cover it adds, for the straightforward reason that it only ever pays after another policy has paid out in full.
What it sits above
Typically general liability, commercial auto, and the employers liability section of workers' compensation. Which policies it sits above is specified in the umbrella itself.
Professional liability is usually not among them. Where professional exposure needs a higher limit, that is normally arranged on the professional liability policy rather than by an umbrella.
The policies underneath are called the underlying, and the umbrella will state the limits it requires each of them to carry.
The underlying limits requirement
An umbrella requires stated minimum limits on the policies below it, and it responds only once those limits are exhausted.
If an underlying limit drops below what the umbrella requires — at renewal, or by moving insurer — a gap opens between the two, and that gap is yours. The umbrella does not drop down to fill it.
So the underlying policies and the umbrella have to be kept in step. This is the most common way umbrella cover fails to do what its holder assumed.
Why it is usually the cheaper route
Raising the limit on an underlying policy prices the whole layer, including the frequent, ordinary claims at the bottom of it. Almost all claims sit there.
An umbrella prices only the rare claims that get past the underlying limit, so a large amount of additional cover generally costs a fraction of raising the primary limit by the same amount.
Where a contract requires a high limit, this is usually how it is met.
Excess versus umbrella
The terms are used loosely and they are not identical. An excess policy generally follows the terms of the policy beneath it, adding limit and nothing else.
An umbrella can be slightly broader than the underlying cover, occasionally responding to something the policy beneath it does not — in which case it typically applies its own retention first.
Where a quote is described as one or the other, it is worth confirming which behaviour you are buying, because the price difference usually reflects a real difference in cover.
Common questions
Usually not. It typically sits above general liability, commercial auto and employers liability. Higher professional limits are normally arranged on the professional liability policy itself.
Because it only prices the rare claims that exceed the underlying limit. Raising a primary limit prices the whole layer, including the ordinary claims where nearly all activity sits.
A gap opens between the underlying policy and the umbrella, and it is yours to carry. The umbrella does not drop down, so the policies have to be kept in step.
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This page is general information, not advice about your specific circumstances. A licensed insurance professional can tell you what’s actually available to you.
General information only, not insurance advice. Coverage, availability, and terms vary by insurer and by state, and are subject to underwriting. Quote My Policy LLC is a licensed insurance producer. Nothing here binds coverage.