What is an Umbrella Policy?

A Commercial Umbrella Policy is a policy designed to provide protection against catastrophic losses. It is written over various primary liability policies, such as the commercial general liability (CGL) policy among others. The umbrella policy serves three purposes: it provides excess limits when the limits of underlying liability policies are exhausted by the payment of claims; it drops down and picks up where the underlying policy leaves off when the aggregate limit of the underlying policy in question is exhausted by the payment of claims; and it may provide protection against some claims not covered by the underlying policies, subject to the assumption by the named insured of a self-insured retention (SIR).

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