Umbrella policy

An umbrella policy sits above a business's primary liability policies, usually commercial general liability, commercial auto and employers' liability, and pays when a claim exhausts their limits. Say a delivery van accident produces a $3.2 million judgment against a company with $1 million of auto liability and a $5 million umbrella (hypothetical). The auto policy pays $1 million and the umbrella pays the remaining $2.2 million. The umbrella's schedule of underlying insurance sets the minimum limits the insured must keep, and a shortfall in an underlying policy falls on the insured.

What separates an umbrella from straight excess liability is breadth. An umbrella may cover some claims the underlying policies exclude or do not address, subject to a self-insured retention, while an excess policy usually follows form and adds only limit. Do not assume it fills every gap. Umbrellas have their own exclusions, commonly for pollution, professional liability and certain employee claims, and some limit coverage for the underlying policy's aggregate.

Contracts often drive the purchase, because leases, general contractors and customers specify minimum umbrella limits. Price follows the liability market: CIAB's second-quarter 2026 survey showed umbrella premiums up 5.3% on average. The guide on umbrella vs excess liability compares the structures, and the How much umbrella coverage do I need? helps size the limit.