Cover Image for Contractor Umbrella Insurance - What To Know

Contractor Umbrella Insurance - What To Know

Construction and risk go hand in hand. Contractors are often required to lift heavy objects, operate large equipment, and work with high-voltage electricity to help build our homes, buildings, and infrastructures. There is no way to completely avoid these risks.

In construction, accidents happen all the time. In fact, one in five workplace deaths occurs on construction projects, making this one of the most hazardous businesses to be in.

You can protect yourself, though, and minimize the damage an accident can cause to both people and the company’s balance sheet. The best way to do this is to purchase a contractor umbrella insurance policy.

What is contractor umbrella insurance?

A contractor umbrella insurance policy increases the
limits of your general liability, commercial auto liability, and workers comp
liability limits (employers liability).

For example, if you purchased a standard general liability policy with a limit of $1,000,000 per occurrence as well as an additional $1,000,000 umbrella liability insurance policy, you would now have $2,000,000 in total limits per occurrence.

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The result is the same when you add additional underlying policies. If you have $1,000,000 general liability and $1,000,000 commercial auto liability limits, and then purchase a $1,000,000 umbrella, your insurance will now cover $2,000,000 for general liability or a commercial auto accident.

A bar graph showcasing the base limits of general liability, commercial auto, and workers comp insurance policies, with an additional segment on each bar representing the added coverage from an umbrella policy, effectively illustrating the heightened limit for each coverage type.

This scales up—your umbrella policy can be as large as you’d like. The more risk and assets your business has, the bigger of an umbrella you should purchase. Additionally, since commercial trucks are a significant source of liability claims, we suggest you always have an extensive umbrella policy if you have trucks in your fleet.

2 Commercial Umbrella Insurance Claim Examples

There are countless examples of umbrella insurance claims, but here are a couple that we think can happen to almost any contractor.

Construction Defect Or Faulty Construction

Construction defects are one of the most probable and costly events that can happen to a contractor. It is not uncommon for a finished project to have issues that result in a person's injury.

For example, if you built a deck at an apartment complex that failed while 15 people were standing on it, you would most likely be investigated for faulty work and sued for the resulting injuries (or deaths) involved in the accident.

Since you are in the construction industry, this risk is unavoidable. And the more projects you work on, the more risk accumulates over time. Due to the severity of these claims, many contractors choose to purchase umbrella insurance to help protect themselves.

Auto Accidents

In a previous article, we explained why we thought auto accidents are one of the top 4 risks facing contractors today. With contractors driving larger vehicles and going to projects across the state, it is no wonder why contractor auto accidents are so common.

Not only are medical bills increasing and vehicle repairs getting costlier, but juries are awarding penalties of record-breaking amounts every year for these accidents. Just verdicts that awarded amounts around $500,000 are now $1,000,000, and we are starting to see more nuclear verdicts that reach $30 million, $50 million, and sometimes up to the $100 million range.


Your business may not be large enough to need a $99 million umbrella policy, but an umbrella of any size will help avoid potential bankruptcy due to a bad accident. Because the risks contractors take simply by driving commercial vehicles and trucks, contractors umbrella insurance is a critical component to protecting your company.

If you need additional information about coverage options and pricing for umbrella insurance policies, let us know.

Austin Landes, CIC

About The Author: Austin Landes, CIC

Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.

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