Andy joined Christensen Group in 2024 as a Commercial Agribusiness Specialist. He began his career as a Commercial Lines Underwriter, spending six years in the role before transitioning to a Risk Advisor with North Risk Partners in 2013. Over the years, he advanced within the company, becoming a partner and later serving as Vice President of Commercial Lines in 2022.
Andy holds multiple professional designations, including Enterprise Risk Management Planning, CPCU, CIC, AU, and AIS. He is a former president of the Hiawatha Valley SHRM organization and has contributed to his community through various leadership roles, including serving on the Hastings ISD 200 school board and multiple volunteer boards. Currently, he is an active member of the Wisconsin Milk Hauler Association, Wisconsin Cheese Makers Association, and Professional Dairy Producers.
Running a business comes with inherent risks. No matter how prepared you are, unexpected liabilities can arise, and a single lawsuit or catastrophic event can threaten your financial stability. That’s where business umbrella insurance comes in—providing an additional layer of liability protection beyond your primary coverage limits.
Determining the right amount of commercial umbrella insurance is not an exact science. However, evaluating several key factors can help business owners make an informed decision. In this guide, we’ll walk you through what to consider when determining the appropriate coverage limit for your organization.
Key factors to consider when choosing a coverage limit
1. Industry risk level
Certain industries are naturally more prone to lawsuits and high-dollar claims. Businesses in sectors like healthcare, transportation (trucking), food manufacturing, and construction are more likely to face substantial liability claims. If your business operates in an industry with high exposure, securing small business umbrella insurance with sufficient coverage is essential to safeguarding your assets.
2. Total assets and financial exposure
Your company’s assets—real estate, equipment, intellectual property, and revenue streams—are all at stake in the event of a lawsuit. If your liability coverage is insufficient, your business could be forced to liquidate assets or take on debt to cover legal expenses and settlements. Assessing your total assets will help you determine how much commercial umbrella insurance is necessary to protect your financial future.
3. Contractual requirements
Many business contracts—particularly those with vendors, clients, or government agencies—specify minimum insurance requirements, including excess liability coverage. Failing to comply with contractual obligations can put your business at risk of legal disputes or even lost business opportunities. Reviewing your agreements can help you determine the minimum required amount of business umbrella insurance to stay compliant.
4. Safety record and risk management practices
Your company’s track record for safety and compliance plays a significant role in your risk exposure. If you have a history of workplace injuries, OSHA violations, or regulatory fines, you may be viewed as a higher liability risk. Proactive risk management, including employee training, safety protocols, and liability mitigation strategies, can help reduce your exposure and influence the amount of small business umbrella insurance you need.
5. Geographic location and jurisdiction
Where your business operates can significantly impact your liability exposure. Certain states and jurisdictions have a reputation for favoring plaintiffs in lawsuits, leading to higher settlement amounts. According to the American Tort Reform Association (ATRA), the most litigious states include:
- California
- Illinois
- New York
- Florida
- Pennsylvania (Philadelphia courts)
- Missouri (St. Louis courts)
- Louisiana (automobile litigation)
- Georgia
- New Jersey
- South Carolina (Charleston courts)
If your business is located in or sells products in these high-risk areas, you may need to increase your commercial umbrella insurance limits to account for the legal environment.
How much business umbrella insurance is enough?
There is no one-size-fits-all answer to how much business umbrella insurance you should carry. Coverage limits can range from $1 million to $100 million or more, depending on the size and scope of your business. However, a good rule of thumb is to purchase enough coverage to protect your total assets and align with your potential risk exposure.
Businesses with high liability risks should consider higher coverage limits, while smaller organizations with lower exposure may be adequately covered with a small business umbrella insurance policy in the $1-5 million range. Conducting a comprehensive risk assessment with your leadership team and an experienced insurance advisor is the best way to determine the appropriate coverage amount for your business.
The value of commercial umbrella insurance
Even with strong risk management practices, accidents and lawsuits can happen. Without sufficient coverage, your business could face devastating financial losses. Investing in commercial umbrella insurance is a strategic move to protect against unexpected liabilities, ensuring your business can continue to operate without disruption.
For a deeper dive into why excess liability protection is crucial, common policy features, and key coverage benefits, check out our other article on the value of commercial umbrella insurance.
Get expert guidance on business insurance coverage
Choosing the right amount of business umbrella insurance requires careful evaluation of your risk exposure, industry factors, and financial assets. At Christensen Group Insurance, we specialize in helping businesses navigate the complexities of liability coverage, ensuring you have the right protection in place.
Contact us today to discuss your coverage needs and explore tailored insurance solutions. Or, visit our Business Insurance page to learn more about how we can help safeguard your company’s future.
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