Contracts

Umbrella Policy

Also known as: Excess Liability

Excess liability coverage layered above the contractor's primary CGL, auto, and employers' liability limits.

An umbrella (or excess liability) policy provides additional liability coverage on top of the contractor's primary policies (commercial general liability, commercial auto, employers' liability). When a claim exceeds the primary policy limit, the umbrella picks up where the primary leaves off. Standard umbrella limits in commercial construction run from $1M to $25M, depending on project type, contract requirements, and the contractor's underwriting.

Umbrella coverage is increasingly required by owners on commercial projects: $5M umbrella is common on mid-size commercial, $10M+ on larger work. The umbrella sits above and follows the primary policies, meaning it generally covers the same incidents but at higher limits. Some umbrellas are "true" excess (they pay only after primary is exhausted) and others are "drop-down" (they replace primary if primary is invalid). Read the umbrella terms carefully; assumptions about what triggers coverage frequently turn out to be wrong at claim time.

Frequently asked questions

What is the difference between umbrella and excess liability?+

In current usage, the terms are largely interchangeable. Strict usage: umbrella may broaden coverage beyond the primary in some cases; excess liability follows the primary exactly. Most modern construction umbrellas are excess-following-form policies that mirror the primary CGL.

What umbrella limits do contractors need?+

Common requirements: $5M on mid-size commercial, $10M+ on larger work, $25M+ on major commercial or industrial. The actual need is driven by contract requirements, project value, and the worst-case loss exposure (high-risk scopes like demolition, hot work, or hazmat justify higher limits).

When does umbrella coverage activate?+

When a covered claim exhausts the primary policy limit. The umbrella then takes over up to its own limit. Some policies have a self-insured retention (SIR) that the contractor must pay before umbrella coverage activates if the primary is for any reason invalid; verify the SIR terms.

Related terms

Commercial General Liability Insurance

Insurance covering third-party bodily injury, property damage, and completed-operations claims arising from the contractor's work.

Additional Insured

A party added to another's liability insurance policy by endorsement, gaining coverage for claims arising from the named insured's work.

Certificate of Insurance

A document proving a contractor carries required insurance coverage, typically required before work begins.

Workers' Compensation Insurance

Insurance covering medical and lost-wage benefits for employees injured on the job. Required by state law in most states.