What’s the Difference Between Excess Liability and Umbrella Insurance?
It’s common to hear horror stories of accidents, lawsuits, and large settlements being awarded, which is why understanding your insurance coverage is so important. You may have heard of excess liability coverage or umbrella insurance as a means to protect yourself – and your pocket. The two terms are often used interchangeably, and it’s easy to mistake them for the same thing. Take a look at the differences between excess liability coverage and an umbrella insurance policy.
What is excess liability?
Excess liability is a policy that provides higher limits to an underlying policy, such as general liability or auto coverage. An excess liability policy is designed to provide additional limits to the underlying insurance, providing a broader financial safety net to the policyholder. An example of how this coverage works would be if you were at fault for an auto accident. The costs, including injuries and medical expenses, exceed your auto insurance liability limit. The excess policy would cover the remaining expenses.
What is umbrella insurance?
Here’s how an umbrella policy works:
- It can be applied to multiple policies – there’s no need to purchase more than one policy.
- It protects against additional claims not included in existing liability policies.
- Like excess liability, umbrella insurance pays the difference when a policy reaches its limit.
When additional coverage is provided by the umbrella insurance, it is subject to the insured’s assumption of a Self-Insured Retention (SIR), or retained limit. This is the amount you’ll have to pay before the insurance company will pay a claim.