What commercial umbrella insurance covers

Every umbrella policy lists the underlying policies it sits over and the minimum limit each must carry. A bodily injury verdict against a landscaping company, for example, is paid first by the general liability policy to its per-occurrence limit and then by the umbrella for the rest. If the underlying policy carried less than the scheduled minimum, the business is treated as self-insuring the difference before the umbrella starts. The same logic applies to the aggregate: once the primary policy's annual aggregate is spent on earlier claims, the umbrella can drop down and pay as primary for later ones, subject to a retention that works like a deductible.

Two products are sold under the same name. A follow-form excess policy adopts the underlying policy's terms exactly: what the primary excludes, the excess excludes. A true umbrella has its own, sometimes broader, insuring agreement and can pay claims the underlying policies do not cover at all, after a self-insured retention. The difference shows up in the wording, not the price list, so the analysis reads the form. For most small businesses a follow-form excess over a well-written package is the right buy; the broader form matters where the primary policies leave known gaps.

The typical schedule lists general liability, commercial auto liability and the employers liability part of the workers compensation policy. Employers liability is the piece owners overlook: it pays when an injured employee sues outside the workers compensation system, and a contract's umbrella requirement usually assumes it is included. Some umbrellas can also be written over liquor liability, hired and non-owned auto, and a non-profit's directors and officers coverage, but each has to be scheduled; an umbrella pays nothing over a policy it does not list.

A certificate of insurance is the document your customer or landlord receives to confirm the umbrella is in force. It shows the carrier, the policy period, the limit and, when the contract asks for it, that the requesting party is an additional insured. Contracts frequently ask for the umbrella to follow the underlying policies in granting additional insured status and in being primary and non-contributory, which means it pays before the other party's own insurance. Those are endorsements, not certificate wording, so the requirement has to be matched on the policy before the certificate can truthfully say so.