An umbrella policy provides liability limits above the underlying general liability, auto liability, and employers liability policies, paying once those limits are exhausted. Businesses use it to meet the higher limits that leases and contracts require, such as $5,000,000, without rewriting each underlying policy. It has its own row on the ACORD 25.
A lease that requires $5,000,000 of liability coverage is rarely asking for a $5,000,000 general liability policy. It expects a primary policy of $1,000,000 or $2,000,000 with an umbrella above it. The IRMI definition describes the umbrella as coverage in excess of underlying liability policies, and insurer explainers such as The Hartford's and the summary at Wikipedia say the same in plainer terms.
How the layers stack
| Layer | Example limit | Responds when |
|---|---|---|
| Primary general liability | $1,000,000 per occurrence | First, for any covered claim |
| Primary auto and employers liability | $1,000,000 each | First, for those exposures |
| Umbrella or excess | $4,000,000 | The primary limit for that exposure is exhausted |
| Total available | $5,000,000 | As the lease requires |
What a reviewer checks
That the umbrella row on the ACORD 25 shows a limit that, added to the primary, meets the contract. That the umbrella schedules the underlying policies it sits over, which the certificate does not show and the policy does. That the umbrella follows form for additional insured status where the building relies on the higher limits. And that the dates line up with the primary, since an umbrella that expires before the primary leaves a gap in the top layer.
Why buildings care
The claims that reach an umbrella are the serious ones: a fall from height, a vehicle in a loading dock, a fire started by hot work. Those are also the claims where the plaintiff names the owner and manager. The umbrella is what makes the vendor's insurance program large enough to absorb them without reaching the building's own policy.
Related terms
Frequently asked questions
What is the difference between umbrella and excess liability?
An umbrella policy typically follows the underlying policies but can also be broader, covering some claims the underlying policies exclude, subject to a retention. An excess policy strictly follows the underlying form and only adds limits. On a certificate both appear in the umbrella or excess row; the contract may accept either.
Does an umbrella policy extend additional insured status to the landlord?
Only if it follows form to the underlying general liability policy's additional insured endorsement, or has its own. Reviewers who require high limits should confirm the umbrella follows form, otherwise the landlord is an additional insured for the first $1,000,000 and not for the layers above.
How much umbrella coverage do commercial leases require?
It depends on the use. Office tenants and routine vendors are often required to carry $1,000,000 to $2,000,000 above primary; restaurants, industrial tenants, and construction contractors commonly $5,000,000 or more. The owner's insurance program and the lease set the figure.