Businesses across all industries should be operating with adequate liability insurance coverage. This insurance helps these businesses pay for damages, which is money that is paid out to anyone who is injured in some way and for the expenses associated with the claim. But this type of coverage can be limited, only covering clients up to policy limits. So, what happens if a judgement exceeds those limits? This is where considering excess or umbrella insurance comes into play. Umbrella and excess insurance policies are designed to be additional layers of protection above primary liability insurance policies, such as a commercial general liability policy. But while these two added coverage options are similar, they do come with some significant differences.
A General Look at Umbrella and Excess
Both of these policies are intended to offer additional coverage above the limits of the underlying coverage; the main difference is what limits are applied to clients. Presently, the market for both types of insurance is in a bit of a limbo as prices of umbrella insurance and excess insurance are set to see dramatic increases over the next few quarters due to COVID-19.
Umbrella policies provide increased limits over underlying insurance and they can provide coverage if there is no coverage in a liability policy that’s already in place. Excess policies only provide coverage when the underlying policy responds to a particular situation, like major injuries or death.
A commercial umbrella liability policy is designed to provide different types of insurance coverage. One type of coverage is the underlying insurance coverage, which means any policies of insurance listed in the Declarations under the Schedule of underlying insurance coverage. It provides coverage for liability exposures for which there is no underlying insurance in place.
Umbrella policies also offer higher liability limits and broaden coverage for things that an underlying policy might not cover. For instance, an umbrella policy could extend coverage to include worldwide coverage. When added coverage is provided by this type of policy, it is usually subject to the client’s retained limit.
An excess liability policy provides coverage above the limits of the underlying coverage. It doesn’t offer broader protection than that provided by the underlying policy. The excess liability coverage may be more restrictive in some scenarios compared to the underlying coverage.
Most umbrella and excess liability policies are not written into standard liability insurance policies, so it is important that clients read through their policies to see what is actually covered.