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September 15, 2022

CGL Insurance vs Umbrella Liability Insurance

Regardless of which industry you find yourself in, running a business will always come with liabilities. Implementing different types of precautions to lessen the chances of accidents is good practice, but there is no guarantee that an accident will never occur. And when it does, we hope you have an excellent commercial liability policy on hand as one of your precautions.

Commercial general liability insurance, also known as CGL, is one of the first insurances business owners and professionals get. This type of insurance covers third-party liabilities, and due to its broad scope of coverage, some people think having just CGL for their business is more than enough. 

But if you are considering taking on larger projects where there’s bigger room for risks and accidents, there’s a big chance your CGL policy may not be enough to cover all damages

You might think purchasing another CGL on top of an existing CGL policy is an efficient way to attain a higher policy limit. But if you look at it this way, you are paying twice as much for the same type of policy, coverage and limitations. So unless you’re purchasing CGL for another person or business, we highly discourage you from getting two of the same insurance policy.

So what should you do? This guide will help you determine if you will need an additional policy or if you just need this little thing called umbrella liability insurance to get you through a rainy day. 

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What Is CGL?

CGL is a highly recommended insurance for every type of business because of its broad coverage involving third-party liabilities. Due to the risks that come with the trade, most, if not all, contractors, professionals, and businesses in the construction industry have CGL. 

CGL can protect you from severe financial loss if a third party sues you and you are found liable for the following: 

  • Bodily injury caused by an accident that happened within your business premises.
  • Property damage caused by your work or your employee’s work, business operations, or products.
  • Advertising/reputation injury like libel, defamation, and slander due to your project’s advertisement.

It can help cover medical fees and repair expenses should you be liable for the accident or damage. Another thing included in most CGL policies is the duty to defend. Duty to defend requires an insurer to help pay legal costs and provide legal advice to support your case, even if you are not found liable.

But despite its broad coverage, this type of insurance still has its limitations.

For example, your employee accidentally gets hurt while working, sues you to pay his medical fees, and wins. Even though it was an accident, your CGL policy cannot cover your employee’s medical fees because he is not considered a third party. Worker’s compensation insurance, on the other hand, can help.

CGL also cannot cover damages or injuries caused by vehicular accidents. You will need commercial auto insurance or fleet insurance.

At first glance, CGL looks comprehensive enough for your business. But if you’re not careful and one of the examples above happens, you will end up paying for more, which is why we recommend you purchase other types of insurance. 

Buying different insurance policies from one provider is called insurance bundling, which is not the same as purchasing two of the same insurance policy. However, insurance bundling cannot increase a policy’s limit because each has a different scope of coverage.

If you want to increase your policy limit without purchasing an additional policy, you should consider getting umbrella liability insurance.

What Is Umbrella Liability Insurance?

Umbrella liability insurance is an additional purchase that increases the limits of your other existing policies.

For example, if you have a CGL policy with a 1 million dollar policy limit and decide to get umbrella liability insurance with a limit of 1 million dollars, your total CGL limit will increase to 2 million dollars. If you have multiple liability policies, you can tap on your umbrella liability insurance if you have multiple claims that exceed your policy’s limits.

Aside from additional insurance coverage, having umbrella liability insurance can help you take on larger projects, especially if a potential client requires a higher liability policy limit. You can also use it to extend the coverage of your existing policies if you plan on investing in more equipment and other assets.

Umbrella liability insurance seems like a flexible policy with no limitations. However, it cannot cover commercial property and professional insurance claims. And when it comes to the duty to defend, some umbrella liability insurance may offer it to a limited extent, while some do not include it at all.

Depending on your insurance provider, umbrella liability insurance can cost around $750 to $1,500 a year, which is considerably less expensive if you compare it to getting an additional policy. However, umbrella liability insurance is not a standalone policy. You can only purchase umbrella liability insurance if you already have an existing liability policy.

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Personalized Insurance According to Your Needs

Whether you’re considering getting CGL, umbrella liability insurance or another type of insurance, who you decide to partner with matters the most.

Contractors Insurance is an award-winning insurance brokerage firm in Ontario known for personalized insurance plans that will help you get the best out of every policy with no hidden costs or fees.

We take the time to explain our partner’s policy coverage and limitations, which is why we are trusted by numerous contractors, tradespeople, and professionals

Our commercial general liability is one of our sought-after insurance. If you would like to bundle it with other policies or top it up with our umbrella liability insurance, you can reach us here. Once you’ve submitted the form, a member of our friendly team will get back to you in no time.



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