How Do General Liability and Umbrella Insurance Work Together? 

When you’re considering purchasing a business insurance policy, it’s important to understand how umbrella and general liability insurance work together. An umbrella liability policy will cover the excess of a general liability policy, up to a specified limit. Let’s say that a business insurance policy has a $1 million coverage limit. If a customer sues you for $3 million, your general liability policy will cover only $1 million. Your customer would be responsible for the remaining $2 million. However, if you purchase an umbrella liability policy with a $5 million coverage limit, the excess of $2 million is covered by your policy. 

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Coverage limits 

The aggregate limit of a general liability and umbrella insurance policy is the maximum amount of coverage an insurer can provide to cover a given claim. If an insurer has underwritten a policy with a sublimit that is lower than the umbrella limit, it is considered to have paid out less than the sublime. However, the insurer must recognize this reduction in the policy wording. This is known as “aggregate reduction.” 

If a claim exceeds the limit of a liability policy, the umbrella policy pays out the remaining costs, typically legal defense and legal fees. For example, if a customer sues a business for $1 million of damage, the umbrella policy would pay out $250,000 of the total claim. An umbrella policy may also cover claims brought outside of the U.S., but the limit will be higher. 


When comparing umbrella and general liability insurance policies, it’s important to understand the exclusions. Some insurers will exclude exposure to real or personal property. Others will limit coverage to a sublimit. A sublimit is a limit lower than the underlying insurance policies. This means that if you’re sued for a large amount, you might not be covered. If you’re unsure what these exclusions mean, it’s best to read the form. 

Another important thing to understand is the difference between an umbrella policy and its underlying coverage. While umbrella insurance and general liability insurance cover the same amount, they don’t have the same types of coverage. The underlying policies should cover a portion of the excess, but an umbrella policy is designed to pay for the ‘excess’ and not the full amount. For example, if you have a CGL policy and additional insured coverage, your excess policy will pay out the extra million dollars in liability coverage that you need to get the contract or complete the work for the customer. 


The cost of general liability and umbrella insurance depends on several factors, including the type of business and industry, the coverage limits desired, and the risk level of the business. Businesses with relatively low-risk levels, such as office work and service industries, will pay smaller premiums than higher-risk companies. For example, an office-based retail business with only one or two clients might only pay a few hundred dollars annually. However, a contractor like a plumber may pay several thousand dollars. 

The cost of umbrella insurance is higher than general liability insurance. It costs between $300 and $1,000 per year. However, this coverage will protect you against the worst-case liability claims, such as catastrophic damage to expensive property or serious injury to third parties. A comprehensive umbrella policy is crucial for protecting your business in these situations. An expert broker can help you choose the best umbrella coverage for your business. Once you’ve determined your risk profile, you can compare costs and select the best option.