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What is Commercial Umbrella Insurance?

Businesses in Massachusetts have access to many primary insurance policies that offer a variety of robust protections. In some situations, however, a business may want more protection than primary policies are able to afford. Commercial umbrella insurance lets businesses that want extra insurance coverage purchase additional protection at affordable rates.

Commercial umbrella insurance is a form of supplemental liability insurance. As supplemental coverage, it builds on the coverages afforded by primary insurance policies (e.g. general liability insurance or commercial auto insurance). As a liability coverage, it mainly offers extra protection from claims and lawsuits that seek to hold a business liable for an incident.

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How Do Commercial Umbrella Policies Complement Underlying Primary Policies?

Commercial umbrella policies may build on the protections offered by underlying primary policies in two distinct ways.

First, a commercial umbrella policy may effectively extend the limits of an underlying policy. For example, if a commercial auto insurance policy has a limit of $1 million, a commercial umbrella policy might provide $3 million worth of additional coverage. The underlying commercial auto policy’s limit is still technically $1 million. With the commercial umbrella policy’s additional coverage, though, a business would essentially have $4 million worth of protection.

Second, a commercial umbrella policy may be used to fill in coverage gaps that leave a business exposed to risk. Umbrella policies’ terms and conditions can sometimes be adjusted to fill in areas that underlying policies’ coverages either overlook or exclude.

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How Are Commercial Umbrella Policies Different from Excess Liability Policies?

Commercial umbrella policies and excess liability policies both give a business supplemental liability coverage. The extent of their potential coverages, however, differs.

Commercial umbrella policies come with their own terms, conditions and exclusions (as well as limits). This allows them to both fill in coverage gaps and extend limits. Additionally, they’re able to build on multiple underlying policies’ coverages simultaneously.

Excess liability policies do not have their own terms, conditions and exclusions. They’re “follow form” policies, which means they adopt the terms, conditions and exclusions of the underlying policy they supplement. Thus, they’re only able to increase limits. They can’t fill in coverage gaps, and they aren’t able to supplement more than one policy.

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What Businesses in Massachusetts May Want a Commercial Umbrella Policy?

Many businesses in Massachusetts may benefit from having a commercial umbrella coverage. In fact, these policies aren’t just for businesses. Nonprofit organizations and municipal governments may also want to procure supplemental insurance that has broad coverages.

A few particular examples of businesses and other organizations that might want to consider getting a policy include:

  • Professionals, as they frequently don’t have the financial capital required to mount a legal defense if they’re named in a liability lawsuit
  • Businesses with sizeable assets, as they can be targeted in opportunistic lawsuits
  • Companies that operate in high-risk industries, as they’re more likely to face a lawsuit
  • Nonprofit organizations, as they frequently don’t have many financial resources to pay for legal counsel or settle a lawsuit
  • Local governments, as they may be sued for any number of reasons

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How Can Organizations in Massachusetts Get Commercial Umbrella Insurance Quotes?

Businesses, nonprofits and municipal governments in Massachusetts can easily get commercial umbrella insurance quotes from multiple insurers by contacting an independent insurance agent. An independent agent can help determine how much protection a business or organization should look for, and then an agent can request quotes for policies that provide that level of protection in just a few minutes.

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