Commercial Excess Liability & Umbrella Insurance

Commercial Excess Liability & Umbrella Ins

Excess Liability and Umbrella Insurance are often used interchangeably. However, they are not the exact same type of coverage, and there are differences.

When an underlying policy, such as General Liability, Auto, or Workers Compensation, does not provide high enough coverage limits, an Excess Liability policy or Umbrella policy will provide increased coverage limits.  Umbrella and Excess Liability are liability-only coverages and do not extend property coverage.

Excess Liability vs Umbrella

Excess Liability is a “follow form” policy.  It follows the terms and provisions of the underlying policy while providing additional coverage limits. In the event of a claim, if the underlying policy limits are exhausted, then the Excess Liability policy would provide additional limits.

These policies do not provide any additional coverage; they only increase the underlying policy’s liability limits.  A claim that is excluded by the primary policy will still be excluded under the excess liability policy.

Umbrella policies can provide broader coverage and higher limits than the underlying policy.   Umbrella policies can provide coverage for claims excluded under the primary policy and higher limits if the underlying policy limit is exhausted.

Unlike an Excess Policy, which follows the underlying policy, an umbrella policy usually has different terms, exclusions, and conditions than the underlying policy.

Deductible vs Self-Insured Retention

Deductible and Self-Insured Retention (SIR) are also often incorrectly used interchangeably.  While similar, they operate very differently.

Here are some key areas where they are different:

With a deductible, the insurer has a duty to defend at the beginning of the claim. When the claim is submitted, the insurer handles the claim and costs from the beginning and will bill the deductible back to the insured.

For a Self-Insured Retention, the duty to defend may not trigger until the threshold of the SIR has been met.  All defense and expenses related to the claim are paid by the insured until the SIR is paid.

They also differ in their effects on policy limits. A deductible erodes the policy limits. So, if there is a $10,000 deductible and a $100,000 limit, the insurance company would pay $90,000, and the insured would have paid the $10,000 deductible.   For a SIR, policy limits do not erode.  If the SIR was $10,000 and the policy limit was $100,000, the insured would pay the entire $100,000 policy limit.

If you have a contract that requires higher liability limits, or you just want the peace of mind that comes with higher limits, we can help with your Umbrella and Excess Liability quotes. We have multiple carriers and deductible/SIR options available to help protect your business.