More height on the coverage you have. Not more coverage.

$1 million over the primary is the common baseline on smaller commercial work, while general contractors and public agencies frequently require $5 million or more on larger projects. The first million of excess limit typically costs materially less than the primary million did, which is why umbrella is usually the best value per dollar of limit in a contractor programme.

What it does, in one sentence

It pays after the policy beneath it runs out. A covered claim erodes your general liability limit; once that limit is exhausted, the umbrella picks up and continues to its own limit. Same claim, same coverage terms, more money available.

That is the whole mechanic, and it is genuinely valuable, because contractor claims have a long tail of severity. A fall, a fire traced to your work, or water through several floors of a commercial building are all capable of running past a $1 million primary limit.

What it will not do

An umbrella follows form. If your general liability excludes faulty workmanship, pollution, or a specific residential or height restriction, the umbrella sitting above it generally carries those exclusions up with it.

This matters because umbrella is sometimes sold as reassurance after a contractor has been told their primary policy is thin. It does not work that way. Adding $5 million above a policy that excludes your core operation produces $5 million of coverage for things that were never the problem. Fix the primary first, then add height.

The underlying schedule, and how gaps open

Your umbrella names the specific policies it sits above and the minimum limits those policies must carry. That schedule is a live dependency, not paperwork.

If a listed policy lapses, changes carrier, or drops below the required limit, a gap can open between the primary and the umbrella where neither responds. It is a quiet failure, because nothing looks wrong until a claim lands in the space between them. Keeping the schedule accurate whenever an underlying policy changes is what keeps the umbrella functional.

What contracts actually demand

For most contractors this line is driven by contract requirements rather than by risk appetite. General contractors, owners, and public agencies set limits, and the practical question is what your current work requires and what the next tier of work would.

Contracts also frequently require the umbrella to follow the additional insured and waiver of subrogation status of the underlying policies. That is a specific thing to confirm rather than assume, because a certificate showing an umbrella limit does not by itself prove the endorsements carry up.

Questions worth asking before you sign

Ask which policies are on the underlying schedule and what minimum limits they must carry. Ask whether your current primary limits still satisfy it. Ask whether the exclusions on your general liability carry up to the umbrella. Ask whether additional insured and waiver status follow to the umbrella for contract compliance. If the primary policy has a gap, ask about fixing that before buying more height above it.