Purchasing insurance for a commercial property can be more complex than some may assume. This is due to the need to have coverage in place for a variety of instances that could occur throughout a company’s operation. However, in certain instances, policy limitations can leave an insured without coverage. Commercial umbrella insurance can help cover these costs. However, it’s important property owners know the distinctions between what can be covered under this type of policy and what cannot.

Commercial Umbrella Insurance

Commercial umbrella insurance provides added liability protection by covering the costs that may go beyond other liability coverage limits. Essentially, this type of coverage complements other commercial liability coverage by kicking in once those coverage limits are reached. For example, if a business is found liable for a client or customer’s injury at the property but the liability policy cannot cover the full amount of damages, a commercial umbrella policy would make up for that shortfall.

Commercial umbrella insurance covers the same types of costs as business liability insurance, such as medical expenses, attorney fees, and damages, when a business faces a lawsuit. However, it’s important to note that commercial umbrella insurance only provides additional coverage when purchased with a general liability policy. If an insured does not have a general liability policy in place, they will be unable to obtain commercial umbrella insurance.

Umbrella insurance serves three basic purposes:

  1. Provides extra limits over those contained in the primary policy.
  2. Pays for certain types of losses that aren’t covered by the underlying policies.
  3. Provides coverage when an aggregate limit in a primary policy has been reduced or exhausted by claim payments.

Often, the more a business interacts directly with clients or customers, the higher its liability risk. These risks can increase if employees utilize heavy machinery or dangerous equipment.

Commercial umbrella insurance can help if a business:

  • Frequently interacts with customers
  • Works on someone else’s property
  • Allows the public to visit during open hours

There are a few things to keep in mind when purchasing commercial umbrella insurance. For instance, most commercial umbrella policies are written on forms drafted by insurers so coverage and limitations can vary widely. Some insurers even call policies “umbrella coverage” when they are in fact an excess policy. This is important to note, as the terms aren’t synonymous. Umbrella coverage provides both extra limits and broader coverage than the underlying insurance. An excess policy provides extra limits but no broader coverage than the primary insurance.

Commercial Umbrella Insurance vs. Commercial Property Insurance

While commercial umbrella insurance is among the many coverage options business owners need to consider before opening their doors, it’s important to understand the differences between it and commercial property insurance. Because commercial umbrella insurance works in tandem with general liability coverage, it will not extend to instances of property damage that are covered under a commercial property policy. For example, if a tornado significantly damages a business and the cost to replace or repair the damaged property exceeds the commercial property coverage limits, the policyholder would still need to cover the difference out of pocket. An umbrella policy would not be applicable to cover the loss amount above commercial limits.

Commercial property insurance is very different from liability coverage, as it protects the company’s physical assets from fire, explosions, burst pipes, storms, theft, and instances of vandalism. Earthquakes, floods, and windstorms typically aren’t covered by commercial property insurance unless those perils are added to a policy through endorsements or by purchasing a separate or additional policy.

Understanding Different Commercial Policies 

Knowing the particular distinctions between commercial insurance policies is incredibly important when insuring a business. While it may seem like some policies provide comprehensive coverage to insure everything a business may need, this is often not the case. For a business to have full insurance coverage for potential losses, multiple policies and endorsements will need to be purchased rather than one singular policy. Despite this, insurance policy language can often be difficult to interpret due to the language being incredibly nuanced and complex for most to decipher. Having the aid of experienced legal counsel can help business owners fully understand what coverage they have in place and what policies they may need throughout their operation.

Insurance Coverage Attorneys

Ensuring a business has the proper coverage in place is no small feat. On top of all the policies that may be needed and their cumbersome language, insureds can still be taken advantage of by their insurance providers through the use of bad faith tactics. At Raizner Slania, we have obtained a reputation for delivering the necessary results for our clients and have successfully handled large, complex insurance disputes against every major insurance company. If your commercial insurance claim has been wrongfully denied, delayed, underpaid, or if your business needs help reviewing coverage options, we can help. Contact us today to see how we can best assist you. 

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