Umbrella and Excess Liability Insurance

Safety Nets for the Unexpected: Commercial Umbrella and Excess Liability Insurance

Commercial umbrella and excess liability insurance is a type of coverage that kicks in when your existing liability insurance—such as general liability, commercial auto, and employer’s liability insurance—is exhausted. It provides additional coverage beyond the limits of these policies. Think of it as an extra layer of coverage that protects your assets and financial health when claims exceed the limits of your underlying policies.

What Does Umbrella and Excess Liability Insurance Cover?

Both commercial umbrella insurance and commercial excess insurance function similarly in many aspects:

• Both types offer additional protection to cover claims that exceed the limits of underlying policies.
• They are “follow-form” policies, meaning they adopt the same coverage terms, conditions, and exclusions as found in the primary policy.
• They are triggered when the limits of the underlying policy are exhausted, providing coverage for the additional limits.

However, commercial excess liability and umbrella insurance can sometimes differ in the following ways:

• Excess liability policy: Adds higher limits to a single underlying liability policy. If you have both a general liability policy and a commercial auto policy and desire higher limits on each, you may require two excess liability policies.
• Umbrella policy: Provides additional limits to one or more underlying liability policies. In the example provided above, one umbrella policy would add higher limits to both the general liability and the commercial auto policy.

The Consequences of Insufficient Liability Insurance Protection

Not having umbrella and excess liability insurance can expose individuals and businesses to significant financial and legal risks. Without this coverage, they may face substantial out-of-pocket expenses and potential bankruptcy if damages from lawsuits exceed the limits of their primary insurance policies.