Commercial Excess Liability & Umbrella Insurance Policies: What's the Difference?

| November 10, 2022

Excess liability and umbrella insurance have often been thought of as interchangeable, but they are not the same. One common factor is they are secondary policies that attach after primary insurance policy limits—such as general liability, employer’s liability and commercial auto insurance—have been exhausted. This is additional coverage that can protect your business from the financial consequences of large losses that exceed what your primary insurance can cover. 

What Is Excess Liability Insurance?
An excess liability insurance policy provides coverage limits in excess of an underlying liability policy. Put another way, excess liability policies “drop down” to replace primary coverage when limits on the primary policy have been exhausted. This type of coverage often matches the exact terms of the primary policy or policies. However, an excess liability insurance policy can also be more restrictive and include more exclusions than primary policies. It should be noted that excess liability insurance only offers additional limits to the primary insurance policy and will not protect a business if there is no primary policy already in place.

What Is Umbrella Insurance?
Umbrella insurance, like excess liability insurance, provides coverage for claims that exceed the limits found in a primary policy. However, this type of policy can offer broader coverage for losses outside of those outlined within the primary policy or policies.

How are they Different? 
While umbrella and excess liability insurance are both types of secondary insurance that function nearly the same, there are a
few notable differences. The biggest difference between the two is that umbrella insurance can broaden coverage and apply to
losses not covered by the primary coverages that are in place, while excess insurance only extends the limits of liability of the
primary policy or policies.

Umbrella and excess liability insurance policies both add critical layers of protection to primary insurance policies. These
coverages can protect your business from catastrophic losses that exceed the coverage limits of your liability policy and reduce
the chance that a lawsuit or other claim could bankrupt your business. At a time when costs for insurance settlements and jury
verdicts frequently reach millions of dollars, umbrella and excess liability policies are a critical component of an insurance and
risk management program.

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