Umbrella and Excess Liability Insurance 101
An excess liability policy adds higher limits to a single underlying liability policy. If you have a general liability policy and a commercial auto policy and you want higher limits on each, you would need two excess liability policies.
An umbrella policy can sit atop one or more underlying liability policies. In the example above, one umbrella policy would add higher limits to the both the general liability and the commercial auto policy.
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.
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.
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