Is General Aggregate the Same as Umbrella Coverage? Key Differences Explained

When researching business insurance policies, you may come across terms like “general aggregate” and “umbrella coverage” used in relation to liability protection. But what do these terms actually mean, and are general aggregate and umbrella coverage referring to the same thing?

The short answer is no – general aggregate and umbrella are two distinct concepts and coverages when it comes to commercial liability insurance. Below we’ll explain the key differences between general aggregate and umbrella protection to understand how they complement each other in a complete insurance program.

What is General Aggregate?

General aggregate is a limit applied to Commercial General Liability (CGL) policies that caps the total payout an insurer will make over the entirety of the policy period, regardless of the number of claims.

For example, if a CGL policy has a $1 million general aggregate limit, the insurer will pay no more than $1 million total for all claims combined during the policy term. This is separate from the per-occurrence limit for individual claims.

The general aggregate applies across coverages like bodily injury, property damage, personal injury, and advertising injury under a CGL policy. Once losses reach the general aggregate limit, the insurer will not pay any additional claims under that policy.

What is Umbrella Coverage?

An umbrella liability policy provides additional liability coverage above and beyond the limits of your other insurance policies like CGL or auto insurance. It kicks in when the limits of your primary policies have been exhausted.

For example, if you have a $1 million per-occurrence CGL policy limit but face a $2 million liability claim, your umbrella coverage would pay for the additional $1 million above your CGL’s per-occurrence limit.

Umbrella can provide $1 million to $10 million or more in extra coverage, protecting you from catastrophic claims that exceed your primary liability limits.

Key Differences Between General Aggregate and Umbrella

While general aggregate and umbrella policies both involve liability limits, they work differently:

• General aggregate caps total payouts under a CGL policy over its entire term.

• Umbrella covers specific claims above the per-occurrence limits of primary policies.

General aggregate works to minimize the insurer’s total risk. Umbrella provides a safety net for the policyholder against large claims.

If the CGL general aggregate limit has been met, umbrella coverage can take over paying covered claims during the remainder of the policy period. So umbrella fills gaps left when general aggregate caps have been reached.

Why Businesses Need Both

Carrying sufficient general aggregate and umbrella limits work together to create a robust liability program:

• General aggregate controls the insurer’s overall exposure while paying smaller claims.

• Umbrella protection steps in when catastrophic claims hit the primary policy limits.

Purchasing enough of both limits reduces risk for insurers while also fully protecting the policyholder if they face a costly lawsuit or property accident.

The Bottom Line

General aggregate and umbrella provide related but distinct types of liability coverage:

• General aggregate limits total payouts under a CGL policy over its term.

• Umbrella offers additional per-occurrence limits above CGL and other policies.

Understanding how these concepts work together is key for businesses seeking complete liability protection. Consulting an insurance professional can help determine adequate aggregate and umbrella limits suitable for your exposure risks.