How an umbrella works
The building's general liability policy pays first, up to its limit, often $1 million per occurrence. The umbrella pays covered claims above that, up to its own limit. Many umbrellas also sit over other primary policies, such as employer's liability and commercial auto, if the building has them.
How much limit do owners carry?
There is no single right answer. It depends on the building's size, the number of units, the lender, the board and how much you have to protect. Lenders often set a minimum. Fannie Mae's multifamily guide, for example, requires general liability of at least $1 million per occurrence and $2 million aggregate, plus excess or umbrella coverage scaled to unit count: $1 million for up to 250 units, $2 million for 251 to 500, and higher tiers above that (source: Fannie Mae Multifamily Guide, Part II, Ch. 5, §503.02). Your own loan documents are what bind you.
Umbrella vs. excess
The terms are often used loosely. An excess policy usually follows the terms of the policy beneath it. An umbrella can sometimes cover claims the primary policy does not. The wording decides, so we compare it before you buy.
Read more: property vs. general liability for landlords.
Frequently asked questions
Do I need an umbrella for a small apartment building?
Not by law, but many owners of even small buildings buy one, because a single serious injury claim can exceed a $1 million primary limit. Your lender may also require it.
Does the umbrella cover the building itself?
No. An umbrella is liability coverage only. Damage to the building is covered by the property policy.
Can a co-op or condo board get an umbrella?
Yes. Co-ops and condos commonly carry an umbrella over the association's general liability, and bylaws or lenders often require one.