An Umbrella Liability Insurance policy provides additional protection to contractors by supplementing the limits of liability offered by underlying liability policies such as Business Auto, General Liability, and Employers Liability (part of your Workers’ Compensation policy).
For example, if you purchase a $1,000,000 Umbrella Liability policy to go along with your existing $1,000,000 General Liability policy and $1,000,000 Business Auto policy, your true level of protection has been increased to a limit of $2,000,000 under both your General Liability and Business Auto Liability policies.
In addition, some Umbrella Liability insurance policies offer “drop down” protection and actually cover some claims that may be excluded under General Liability, Business Auto, and Employers’ Liability (part of your Workers’ Compensation) policies. When this happens, your Umbrella coverage may be subject to a self Insured Retention which acts like a deductible.
The cost of Umbrella Liability Insurance for the first $1,000,000 layer of coverage is typically 20% of the premiums for the underlying Business Auto Liability and General Liability. An Umbrella policy is usually subject to a minimum premium that may range from $500 to $1000 for each increment of $1,000,000 that is purchased.