Commercial umbrella insurance—sometimes called excess liability—adds higher liability limits above your existing policies. When a claim exceeds the “underlying” policy’s limit, your umbrella can step in to pay the remainder up to its own limit, helping protect cash flow and assets.

Who this helps

Growing businesses signing larger contracts with landlords, lenders, or enterprise customers.
Companies with fleets, job sites, or public‑facing locations where a single incident could be severe.
Owners who want liability limits that match their balance sheet and future growth, not just state minimums.

State specifics at a glance

Underlying GL and auto liability requirements are driven by state law, contracts, and carrier guidelines; umbrellas usually require at least $1M per occurrence underneath.
Some states and industries have additional requirements for auto, employer’s liability, or professional coverage that affect how umbrellas attach.
Court trends and nuclear verdicts vary by jurisdiction, which can influence recommended umbrella limits.

Use Paca to right‑size your limits

Upload your existing GL, auto, and workers’ comp policies — Paca maps current limits, deductibles, and employer’s liability in one view.
Model worst‑case scenarios by contract, fleet, or location — see how far your current limits stretch versus target umbrellas.
Turn on renewal alerts and documentation tasks — keep contracts, certificates, and loss runs organized before you negotiate limits.
Export a scenario summary for your broker or carrier — align umbrella layers with real‑world risk and contractual requirements.

What Does a Commercial Umbrella Cover?

Umbrella policies generally sit over these liability coverages:

General Liability (GL): Bodily injury, property damage, and personal/advertising injury to third parties
Commercial Auto Liability: Injuries or damage you cause while operating covered autos
Employer’s Liability: Third-party suits related to employee injuries (as part of Workers’ Comp)
Sometimes other scheduled liability policies (depends on the carrier)

Key features:

Excess Limits: $1M–$10M+ available; purchased in $1M layers
Defense Costs: Often follow form of the underlying—read the policy to confirm whether defense is inside or outside the limit
Self-Insured Retention (SIR): May apply when no underlying policy responds

What’s Not Covered (Common Exclusions)

Umbrellas don’t fix coverage gaps; they provide more limit over what you already have. Typical exclusions include:

Professional liability, E&O, D&O, employment practices liability (unless specifically scheduled)
Intentional or expected injury
Contractual liability beyond what’s covered in the underlying
Property damage to your own property
Workers’ compensation benefits (the policy sits over Employer’s Liability, not WC benefits)
Pollution and cyber unless scheduled (often excluded)

Tip: If you need broader protection (e.g., cyber, pollution), consider dedicated policies with their own limits; some carriers allow scheduling those under an umbrella/excess, but terms vary.

How It Works (Simplified Example)

Your GL policy has a $1,000,000 per-occurrence limit
You buy a $4,000,000 umbrella
A customer slip-and-fall results in a $2,200,000 judgment
GL pays $1,000,000; the umbrella pays the remaining $1,200,000 (subject to policy terms)

If the underlying policy doesn’t respond (e.g., an excluded peril), the umbrella may also deny—unless it’s a true excess policy with different terms and an SIR. Always confirm “follow form” language and any drop-down provisions.

Who Needs It?

Consider a commercial umbrella if you:

Work under contracts that require total limits above $1M per occurrence
Operate in high foot-traffic areas or perform on customer premises
Run fleets, job sites, cranes, or heavy equipment
Face potential high-severity claims (e.g., construction, manufacturing, logistics)
Lease from landlords who mandate higher liability limits

Choosing Limits

Use a blend of:

Contractual requirements (customer, landlord, lender)
Industry benchmarks for severity risk
Asset and revenue protection goals
Risk tolerance, safety culture, and claims history

Many growing firms choose $2M–$5M; larger or riskier operations may need $10M+.

Underwriting & Cost Factors

Industry/class code risk profile
Size of operations (revenue/payroll/vehicle count)
Loss history (frequency and severity)
Safety programs and fleet/driver controls
Underlying policy limits and carriers

Umbrella premiums are typically efficient relative to the added protection; cost per added $1M often decreases as you add layers.

Takeaways

Umbrellas extend limits—they rarely broaden what’s covered
Verify underlying minimums and follow-form language
Match limits to real-world loss potential and contractual needs
Review exclusions so you’re not surprised at claim time

References

National Association of Insurance Commissioners – Commercial Liability Resources — consumer materials on liability and umbrella concepts.
Insurance Information Institute – Commercial Umbrella Insurance — overview of how umbrella and excess liability policies work.
International Risk Management Institute – Umbrella and Excess Liability Overview — technical discussions of umbrella structures and attachment.

Commercial Umbrella Insurance

When a commercial umbrella helps