When does a plumbing contractor need an umbrella policy?

Usually when a contract asks for higher limits than your general liability policy carries, or when the size of your work means a single bad loss could exceed your primary limits. No California law requires a plumbing contractor to carry an umbrella; the only state-mandated liability limit is the CSLB requirement for LLC licensees, which can be met with primary coverage.

An umbrella (or excess liability) policy sits over your general liability, commercial auto liability and the employer's liability part of your workers' compensation policy. When a covered claim exhausts the limit of an underlying policy, the umbrella pays the rest, up to its own limit. Because it responds only after the primary policy has paid, it is generally the least expensive way to add a large amount of limit.

Common triggers for a plumbing contractor:

• A general contractor's or owner's insurance exhibit asks for $2,000,000 per occurrence, or $5,000,000 or more in total, reached by stacking the umbrella over a $1,000,000 primary policy.
• Commercial, multi-family, public-works or hospital work, where property values and the number of people exposed to a gas or water loss are high.
• A growing service fleet, since a van in a freeway collision is often the likeliest seven-figure claim.

Check the umbrella's terms, not just its limit. Some follow the underlying exclusions and some add their own, and most require specified minimum underlying limits. If a contract extends additional insured and primary and non-contributory requirements to the umbrella, confirm that before signing.