Umbrella and excess liability are both referring to different commercial insurance policies you can have. These options can increase the liability limits above the underlying liability policies. You may need to use them for a variety of reasons.
For example, if your organization expands because of mergers and internal growth and the regular insurance policy won’t cover those new exposures, you may need one. Likewise, a major jury decision by appellate courts may require you to increase your liabilities and limits.
Another reason you may need more coverage is when top management people change, so the management decides to expand their limits. Insurance companies are likely to offer one or the other and not both, though they are similar (and different) in many regards. So how do excess liability insurance vs umbrella policies differ?
Excess liability insurance vs umbrella. The commercial liability umbrella coverage form is complete. It has its own insuring agreements, exclusions, conditions, limits, and definitions. It refers to the underlying coverage forms or policies but the insurance it provides is based on the coverage form itself.
Commercial umbrella policies are a type of liability that provides you with additional limits over your underlying policies. In short, it increases the limits of each policy in your organization or business. Many companies choose this version because it can include coverage not originally available under your current or underlying coverage.
It is perfect for those who want to broaden your insurance coverage and close the gaps in your current plan. It also includes first-dollar-liabilities that are above other self-insured retentions or retained limits.
Excess liability insurance vs umbrella. Excess policies are dependent policies. They are based on the underlying coverage instead of having their own insuring agreements, exclusions, conditions, and definitions. They do not add to that underlying coverage.
Excess liability insurance can also provide more limits on your underlying liabilities, but they can be more restrictive in nature. It can overlay the existing policy by increasing and adding to the per-person or per-occurrence limit. It covers all the limits and definitions in your current policy and won’t have any effects on any other policies you may hold. However, a disadvantage of this insurance is that it can be too restrictive and may have more restrictions than your current coverage.
Before making any decisions about extra insurance, it’s best to read the fine print before signing up. You aren’t required to have either commercial umbrella or excess liability insurance, so you may not need it at this time. Likewise, you may choose not to sign up or adopt a new policy that incorporates everything you now need.
Umbrella policies were originally designed to offer additional limits and cover some of the gaps in the underlying coverage. They were not simply increased limits silos. They also provided a canopy or an umbrella that offered the insured a measure of protection from certain limitations in the underlying. If the umbrella covered something that the underlying did not cover, the insured paid a self-insured retention, usually in the range of $10,000 to $50,000, and then had coverage up to the umbrella’s limit.
However, as primary commercial general liability coverage forms and policies became broader, the umbrella’s additional coverage was reduced. It did not change but its coverage became narrower because the primary commercial general liability coverage became broader.
From the insured’s perspective, there are no surprises or excitement in excess coverage forms and policies. All coverage disputes arise from the underlying coverage. Once the primary coverage is determined, the excess follows form by providing additional limits up to its ultimate limit. Excess coverage allows easy comparisons based purely on price and capacity.
From the insurance company’s point of view, excess coverage forms and policies can be very exciting and this is one reason why they may be more difficult to obtain. The insurance company must review and underwrite the underlying coverage and decide if it wants to assume the coverage provided. This is a special problem when the underlying coverage forms or policies are non-standard or have unique or manuscript coverages and endorsements.
Umbrella underwriters are more confident when they price commercial liability umbrella coverage because they deal with their own coverage form. They do not have to take the extra step to research or analyze another carrier’s underlying coverage forms or policies.
It is essential that you understand that these are not interchangeable terms because there are differences. Your insurance company may only offer one or the other, so it’s a good idea to learn more about them now to ensure that you know what you’re getting.
A true commercial umbrella policy usually includes a deductible with the coverage form. It’s also important to note that just because a policy covers more than one thing, it’s not necessarily an umbrella policy.
These extras aren’t to be confused with commercial general liability or auto liability insurance. You will need to have the recommended or minimum amounts of coverage to run the business legally and correctly. These policies just add to it and give you more cushion. If your traditional insurance doesn’t cover something entirely, one of these policies may cover those needs so that you don’t have to pay anything out of pocket.
Of course, need is a relative term and means different things. Most companies won’t necessarily need to use this insurance on top of their current policy. However, they can give you added protection from claims, such as property damage or personal injury. They can also help to cover attorney fees, slander, false arrest, and much more.
You can find a variety of amount ranges, ensuring that you can pick the number that best suits your needs. Many people initially agree that umbrella policies are a better choice if they’re available. They have a broad form and won’t just follow your underlying policy. The insurance provided is based on the coverage offered in that policy and not just what your current one provides. Therefore, it can offer extra protection for gaps missed in your underlying policy.
The excess liability version follows your underlying policy and keeps everything relatively the same, though there could be a few changes here and there. Therefore, it may not cover anything new or fill in gaps in your current insurance policy.
We hope this article on excess liability insurance vs umbrella has been informative. The goal here is to ensure that you protect your company from bankruptcy or falling under because you have large claims that your regular insurance won’t cover completely.
