I have an umbrella, why do I need professional liability?

Why are you paying for a big umbrella policy if it won’t pay a dime when a client’s skin is burned during a chemical peel? Most salon owners think of insurance like a shield that gets bigger as you pay more. They assume General Liability is the small shield and the Umbrella is the giant one that covers everything else. This "auto-magical" thinking is dangerous for your business. You buy an umbrella to protect against a "slip and fall" in your lobby, but it usually ignores the actual work you do on clients. If your salon performs a service that requires a license, your Umbrella is likely programmed to stay silent if that service goes wrong. You aren't just under-insured; you are wide open.

The problem is that insurance isn't one single "shield." It’s a stack of specific rules. When you add a new service—like moving from basic haircuts to lash extensions or chemical skin treatments—your risk changes. Your General Liability and Umbrella were built for a retail shop, not a treatment room. If a stylist uses the wrong product and a client loses their hair, that is a "professional act." Standard umbrellas are designed to ignore those acts. If the first policy says "we don't cover hair loss," the umbrella policy simply follows that lead.

Below are the specific ways this setup fails when you grow faster than your paperwork:

• Standard Umbrellas usually run away from professional work. An umbrella sits on top of your General Liability. If your General Liability refuses to cover a beauty service mistake, the umbrella won't step in to help.

  
  

• Mixed-up dates can leave you with no coverage. If your main policy ends in January but your umbrella ends in June, you can end up with a "dead zone" where the two policies don't talk to each other correctly during a claim.

  
  

• If it isn't on the "List," it isn't covered. Your umbrella isn't a blanket over your whole life. It’s only a blanket over the specific policies listed on a page called the "Schedule." If a policy isn't on that list, the umbrella doesn't exist for it.

  
  

• "Retentions" are like a wall of cash you have to pay first. Sometimes an umbrella covers things your main policy doesn't, but there’s a catch. You might have to pay the first $10,000 or $25,000 out of your own pocket before the umbrella pays anything.

  
  

• Small claims can eat your protection before the big one hits. If you have several small mistakes in one year, you might run out of money in your main policy. If your umbrella isn't set up perfectly, it won't "drop down" to help with the next claim.

What is an umbrella policy actually designed to do?

Think of an umbrella policy as an "extension cord" for your limits, not a whole new power source. It was created to protect businesses from one-off disasters that cost millions, like a massive fire or a multi-car accident. It is designed to sit on top of three specific things: your general liability (for the building), your auto liability (for car crashes), and your workers’ comp (for injured staff). It is not a "catch-all" for every mistake your stylists make.

There is a big difference between "Excess" and a "True Umbrella." Most policies today are actually Excess policies. This means they are "follow-the-leader." If the first policy (the leader) says "no" to a claim because it was a beauty service error, the excess policy says "no" as well. A True Umbrella is a bit rarer and can cover extra things, but it always comes with a Self-Insured Retention (SIR). This isn't like a $500 deductible on your car. An SIR is often $10,000 or more that you must pay to a lawyer before the insurance company even looks at your file. If you’re a salon owner, you likely have the "follow-the-leader" type, which means if your professional work isn't covered by the first policy, the umbrella is useless.

Why do matching dates matter so much?

In the insurance world, we call it "concurrency," but you can just think of it as "alignment." When your policies don't have the same start and end dates, you create a trap. Imagine your main liability policy changes its rules in January to stop covering a specific type of eyelash glue. If your umbrella doesn't renew until July, it is still expecting the "old" rules to be in place. When a claim happens in March, the two companies will argue over who is responsible while you’re left holding the bill.

The biggest danger of mismatched dates is that you can accidentally create a "hole" in your millions of dollars of protection. If your main policy gets "used up" by a few claims, your umbrella is supposed to kick in. But if the dates don't line up perfectly, the umbrella carrier might claim they don't have to "drop down" yet. You might think you have $5 million in total coverage, but because of a date error, you effectively have $1 million, then a huge gap where you pay everything, then the umbrella. That is a recipe for bankruptcy.

If it isn't on the "Schedule," is it even there?

An umbrella policy is only as good as the list of policies it sits on. This list is called the Schedule of Underlying Insurance. It is a single page in your policy that lists the carrier name, the policy number, and the limits for your other insurance. If you buy a new van for the salon and get a new auto policy, but you forget to tell your umbrella agent to add it to the "list," that van is not protected by the umbrella.

I see this happen all the time when franchisees try to save money. They switch their auto or general liability to a cheaper company mid-year. They think, "I'm still covered because I have an umbrella." But the umbrella policy is still looking for the old company listed on the schedule. If you have a $2 million accident, the umbrella carrier will look at the list, see the wrong company name, and deny the claim. It’s a simple clerical error that can cost you your entire business.

How do the limits actually add up in a real claim?

Let’s look at the math. A standard salon policy usually has a $1 million "per occurrence" limit. That’s the most they pay for one accident. It also has a $2 million "aggregate" limit, which is the most they pay for the whole year. When you add a $1 million umbrella, you are trying to make those numbers bigger. If it’s set up right, you now have $2 million for one accident and $3 million for the year.

But here is the catch for beauty professionals: The umbrella usually doesn't sit on top of your professional liability. If you have a separate policy for "Professional Liability" (the one that covers skin burns or hair damage), the umbrella is likely ignoring it. Data from the Insurance Information Institute (III) shows that lawsuits are getting much more expensive. In the beauty space, "professional" mistakes are now more common than "slip and fall" accidents. If a jury awards a client $1.5 million for a bad reaction to a service, your $1 million professional policy pays its part, and then... nothing. The umbrella won't pay the remaining $500,000 because that professional policy wasn't on the "list." You are paying for $5 million of "protection" that is essentially blind to your biggest risk.

Why is Professional Liability a different animal?

Professional Liability (also called "Malpractice" or "Errors and Omissions") is about the work you do. General Liability is about the place you do it.

• General Liability: Someone trips over a rug in your lobby.

  
  

• Professional Liability: A stylist leaves a chemical on too long and scars a client’s scalp.

  
  

The reason your umbrella doesn't "just cover" the scarred scalp is that the risk is much higher and more specialized. An insurance company can guess how many people might trip in a lobby based on your square footage. But they can't easily guess how many stylists might make a mistake with a new chemical peel.

According to the National Association of Insurance Commissioners (NAIC), these policies are "non-standard." This means every company has its own secret recipe for what they will and won't cover. Your umbrella company is usually a "general" company. They don't want to be responsible for specialized beauty mistakes unless they have specifically agreed to it and charged you for it. If you don't have a separate Professional Liability policy, you have no "base" for the umbrella to sit on.

What happens if you only have an Umbrella and a claim hits?

This is where the math gets ugly. Let’s say you own a lash and skin salon. You have $1 million in General Liability and a $5 million Umbrella. You don't have a separate Professional Liability policy because you thought the Umbrella covered "everything."

One of your estheticians makes a mistake during a laser treatment. The client is badly burned and sues for $1.2 million.

1. Your General Liability company looks at the claim and says, "This was a professional service mistake, and our policy says we don't cover those." They won't even pay for your lawyer.

   
   

2. Your Umbrella company looks at the claim and says, "Since the first company didn't pay, we don't have to pay either. Also, we don't cover professional services."

3. The Result: You are now on your own. You have to spend $50,000+ on a lawyer and then find $1.2 million to pay the client.

   
   

If you had a $1 million Professional Liability policy, it would have covered the lawyer and the first million. If that policy was correctly added to your Umbrella's "list," the Umbrella would have paid the final $200,000. Without that separate professional policy, your umbrella is just a very expensive piece of paper that does nothing to save your salon.

FAQ

Does my umbrella cover my staff if they crash their own car while working? Only if you have a specific "Hired and Non-Owned Auto" policy and that policy is listed on your umbrella's schedule. If you don't, the umbrella will not help you if the salon gets sued for the crash.

I have a "Professional" add-on to my main policy. Is that enough? Usually not. Those "add-ons" often only cover a tiny amount, like $50,000. If you get sued for $1 million, that add-on is gone in a heartbeat, and the umbrella usually won't cover the rest because the limit was too small.

What is an SIR? It stands for Self-Insured Retention. It’s like a giant deductible you have to pay yourself before the umbrella carrier will help you. It often starts at $10,000.

If I open a second location, is it covered by my umbrella? Maybe for the first 30 days. After that, if you haven't officially told the insurance company and added it to the "list," that new location might have zero umbrella protection.

Conclusion

An umbrella policy is great for "big" problems, but it isn't a "fix-all" for your business. In a salon, your biggest risk isn't the floor; it’s the services you provide in the chair. Relying on an umbrella to cover a beauty mistake is like trying to catch water with a net—the holes were put there on purpose. To stay safe, you need a Professional Liability policy that handles the work you do, and an Umbrella that is specifically told to watch over it. Anything else is just a paperwork shortcut that fails exactly when you need it most.

About the Author

Wade Millward is the founder and CEO of Rikor, a technology-enabled insurance and risk management company focused on the franchising industry. He has spent his career working with franchisors, franchisees, and private-equity-backed platforms to uncover hidden risk, design scalable compliance systems, and align insurance strategy with how franchise systems actually operate. Wade writes from direct experience building systems, navigating claims, and helping brands scale without losing visibility into risk.