Every business faces risks, from customer injuries to lawsuits and property damage claims. While standard liability insurance policies cover many risks, there are situations where claims exceed policy limits—leaving business owners financially exposed. That’s where umbrella insurance comes in. This extra layer of protection provides additional liability coverage to safeguard your Colorado business against major claims and lawsuits.
What is Commercial Umbrella Insurance?
Commercial umbrella insurance extends the coverage of your existing liability policies, covering costs that exceed your standard limits. Without umbrella insurance, businesses must pay out-of-pocket for excess legal fees, medical expenses, and settlement costs.
This coverage kicks in when the limits on these policies are exhausted:
- General liability insurance (slip-and-fall accidents, property damage claims).
- Commercial auto insurance (vehicle accidents involving company vehicles).
- Employer’s liability insurance (lawsuits from employee injuries).
Why Colorado Businesses Need Umbrella Insurance
- Rising Lawsuit Costs
Lawsuits are becoming more expensive, with settlements often exceeding $1 million. Without umbrella coverage, businesses must pay excess costs out of pocket.
- Severe Weather-Related Claims
Colorado’s hailstorms, wildfires, and snow-related accidents increase liability risks for businesses, from damaged properties to customer injuries.
- High-Risk Industries
Some businesses face greater liability exposure, including:
- Construction companies (job site injuries and property damage).
- Restaurants and bars (alcohol-related incidents and slip-and-fall claims).
- Transportation businesses (delivery vehicles and fleet accidents).
If a serious workplace accident, defective product claim, or major property damage case exceeds your standard insurance limits, umbrella insurance prevents financial devastation.
What Does Umbrella Insurance Cover?
A commercial umbrella policy provides:
- Additional Liability Protection
- Extends coverage beyond general liability and commercial auto insurance limits.
- Covers medical expenses, property damage, and legal fees.
- Coverage for Legal Defense Costs
- Pays for attorney fees, court costs, and settlements when businesses face lawsuits.
- Protection Against Catastrophic Claims
- Covers multi-million-dollar lawsuits, which could otherwise bankrupt a small business.
What Umbrella Insurance Does NOT Cover
🚫 Business property damage (covered under commercial property insurance).
🚫 Employee injuries (covered under workers’ compensation insurance).
🚫 Professional mistakes or errors (covered by professional liability insurance).
🚫 Cyberattacks or data breaches (covered by cyber liability insurance).
How Much Umbrella Coverage Do You Need?
Coverage amounts typically range from $1 million to $10 million, depending on business size and risk level. Factors to consider when choosing coverage:
- Industry risk (construction, transportation, and hospitality businesses need higher limits).
- Business revenue and assets (more assets = higher risk exposure).
- Likelihood of lawsuits (if your business interacts with the public, higher coverage is advised).
How Much Does Umbrella Insurance Cost?
Umbrella insurance is affordable compared to potential lawsuit costs. On average:
- A $1 million umbrella policy costs $500 to $1,500 per year.
- Additional coverage per million dollars costs around $300 to $500.
Final Thoughts
For Colorado businesses, umbrella insurance is a cost-effective way to protect against large lawsuits and liability claims. Whether you operate a small retail store, a construction company, or a restaurant, this extra layer of coverage provides peace of mind and financial security. Review your existing liability limits and consider adding umbrella coverage to ensure your business is fully protected.
