Umbrella & Excess Insurance
Umbrella and excess insurance policies provide your business with protection against large claims that may exceed either your general liability, auto liability, or employer's liability coverage limits. An umbrella is a separate "stand alone" policy that sits over the top of scheduled underlying policies. An umbrella can sometimes provide coverage for "gaps" that exist in the underlying coverage forms if the umbrella does not exclude the exposure. In comparison, an excess policy also sits over the underlying policies that are scheduled for coverage; however, the excess policy is "following form" and does not offer coverage broader than what is contained in the schedule of underlying policies.
How Umbrella and Excess Coverage Limits Work
Your general liability, employer's liability and auto liability policies have a maximum policy limit. If you have a loss where the total claim amount exceeds your underlying policy limit, you could be responsible for the difference. When you have an umbrella or excess policy, the benefit of the additional liability limit kicks in once a large loss has exceeded the limits of the applicable scheduled underlying insurance policy.
Let’s say you have a general liability policy with a limit of $1,000,000. If you face a general liability claim which totals $1,500,000, you would be responsible for paying the additional $500,000 out of your own pocket. If your business had an umbrella or excess policy, it would kick in after you have maxed out the limits of your underlying policy and you would not have to pay the additional $500,000 out of pocket.
- Claim amount: $1.5 million
- Underlying policy limit: $1 million
- Amount covered by umbrella policy: $500,000
Umbrella and excess insurance policies are the perfect compliment to your existing business insurance policies such as:
- General liability
- Business auto
- Employer's liability
You can usually obtain umbrella or excess coverage in increments of $1,000,000 to sit over the top of your existing business policies. This will provide extra protection against exceptionally large claims.
Beach & O’Neill Insurance Associates can assist you with understanding how umbrella and excess coverage works. We can also help you decide on whether an excess or umbrella policy is right for your business. Contact our office and see how we can help.