What is Commercial Excess/Umbrella Liability in Construction?
In the construction industry, unexpected incidents can result in costly claims that exceed the limits of your standard insurance policies. That’s where Commercial Excess/Umbrella Liability insurance steps in, providing an extra layer of protection to safeguard your business when things go beyond the usual.
Think of it as your insurance safety net. It kicks in when a claim exceeds the coverage limits of your General Liability, Commercial Auto Liability, or Employers' Liability policies. It’s designed to protect your business from major losses that could otherwise leave you financially exposed.
What Does Commercial Excess/Umbrella Liability Cover?
At its core, Commercial Excess/Umbrella Liability insurance covers claims that go over the limits of your underlying policies.
Here are a few examples where this type of coverage can make all the difference:
A severe injury on the job site that racks up medical expenses beyond the limits of your General Liability policy.
A major auto accident involving one of your company vehicles, resulting in damages that exceed the coverage of your Commercial Auto Liability policy.
A lawsuit where an employee sues your company for negligence, and the settlement surpasses your Employers' Liability coverage.
Without Commercial Excess/Umbrella Liability, your business would be responsible for paying out-of-pocket for these kinds of massive claims once your primary policy limits are exhausted. But with this coverage in place, you’ve got an added layer of financial protection.
Excess Liability vs. Umbrella Liability: What’s the Difference?
You’ll often hear Excess Liability and Umbrella Liability used interchangeably, but they’re not exactly the same thing:
Excess Liability insurance provides extra coverage above the limits of a specific policy. For example, you might have excess coverage solely for your General Liability policy. It’s more of a single-policy extension.
Umbrella Liability, on the other hand, offers broader coverage that can extend the limits of multiple policies. So, an umbrella policy might provide additional protection for both your General Liability and Commercial Auto Liability policies. Plus, umbrella policies often cover certain types of claims that might not be covered by the underlying policies.
In short: Excess Liability is specific and adds to a single policy, while Umbrella Liability is broader and can cover multiple types of insurance.
Why Do Contractors Need Commercial Excess/Umbrella Liability?
Construction is full of risk, and even with strong primary insurance policies, accidents, injuries, and lawsuits can quickly lead to hefty claims. Having Commercial Excess/Umbrella Liability ensures your business won’t be left vulnerable if something catastrophic happens.
Here’s why contractors should consider this extra coverage:
High Risk, High Reward: Construction sites are inherently high-risk environments. Whether it’s injuries, accidents, or property damage, the stakes are high, and claims can soar. Commercial Excess/Umbrella Liability helps keep your business protected when those claims go above and beyond your basic coverage.
Contractual Requirements: Many contracts require contractors to carry a specific level of liability coverage. An Umbrella policy can help you meet those contract requirements, ensuring you’re always in compliance and able to take on bigger jobs.
Peace of Mind: With a backup plan in place, you can focus on the job at hand, knowing that your business is financially covered if something goes wrong.
How Does Commercial Excess/Umbrella Liability Work?
Let’s say your business has a General Liability policy with a limit of $1 million per occurrence. One day, there’s an accident on the job site, and the injured party sues your business for $1.5 million. Once your General Liability policy pays out its $1 million limit, your Umbrella or Excess Liability policy would kick in to cover the remaining $500,000.
This extra coverage ensures that your business doesn’t have to shoulder the financial burden of paying out the additional costs beyond your primary policy’s limits.
Is Commercial Excess/Umbrella Liability Right for You?
If you’re a general contractor or subcontractor in the construction industry, the answer is likely "yes." Having this extra layer of protection could mean the difference between a costly claim sinking your business or staying afloat with the right coverage.
In construction, it’s all about being prepared for the unexpected, and Commercial Excess/Umbrella Liability insurance helps ensure that you’re ready for even the biggest claims. It’s an investment in your business’s long-term stability and success.