What is Excess Liability Insurance?

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Excess Liability insurance is a type of policy that provides limits that exceed the underlying liability policy. It is no broader concerning the incidents covered by the primary insurance, meaning it will not expand the stated coverage but will provide higher limits on top of the original policy. The primary purpose of Excess Liability insurance is to close coverage gaps and to offer an added layer of protection in case the underlying insurance is exhausted of all possible resources.

When a claim is reported to an insurance company, the first policy that will cover all financial losses and damages is the underlying, or primary, policy. But if the claim exceeds the limits of the primary policy, that is where Excess Liability policy kicks in, picking up the remaining costs that were not covered by the primary insurance.

Excess Liability insurance serves as the insurance of your insurance. It makes sure that everything is covered, even if your primary coverage has reached its declared limits. To better understand how Excess Liability works, here’s an example scenario:

One of your customers accidentally slips on the floor while visiting your small business, resulting in a spinal cord injury. He files a claim against you, and the court decides that you are responsible for the incident. The injured customer wants a $1,500,000 settlement, but your General Liability insurance has policy limits of up to $1,000,000 per occurrence. If you have Excess Liability insurance of $1,000,000 or more, you don’t have to worry about the remaining $500,000. Without it, you would have to pay the difference out of pocket.

What does an Excess Liability Policy Cover?

Small businesses have varying needs and insurance requirements. Some states require owners to obtain Commercial Auto insurance before they can legally operate while other areas mandate small companies to carry at least General Liability insurance before they are allowed to offer products or services. Whatever insurance policies are required for your business, maintaining minimum limits alone will not protect you from the most expensive lawsuits.

Since an Excess Liability policy provides additional funds in case you max out your primary insurance, it offers invaluable peace of mind to all business owners knowing that their trade is protected from all financial challenges on all angles. Though, keep in mind that it is only applicable to the underlying coverage specifically stated and will not apply to additional insurance policies you carry.

Excess Liability Insurance can increase your coverage for:

  • Lawsuits and legal expenses related to your business
  • Property damage and bodily injury cases such as slips and falls
  • Additional protection for your Commercial Auto insurance policy
  • And other excess liabilities on top of your primary policy

An Excess Liability policy is not applicable for:

  • Multiple policies
  • The first line of defense
  • Additional coverage enhancements

Basically, if you want to provide additional limits but not added coverage on top of your primary insurance, excess liability is the answer. So whatever coverage you have on your existing policy, the same coverage applies for excess liability, the only difference is the amount of supported limit.

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What is the difference between Umbrella and Excess Liability Insurance?

There’s a lot of confusion between Excess Liability and an Umbrella Insurance policy. Even in the industry, these two terms are often used interchangeably. While both of them are beneficial for extending the limits of your primary plan, still there are significant differences to take note of.

Umbrella Insurance is a type of additional liability designed to protect you from other damages or losses not covered by existing policies. It works almost the same as with Excess Liability insurance except that:

  • It can be applied to multiple underlying policies
  • It can cover claims not included in the existing underlying policies
  • Requires SIR or Self-Insured Retention to cover claims

If you want to cover claims that are not initially included in your primary policy, you can do it via Umbrella Liability insurance, provided that you have settled the SIR. The SIR is the amount you need to pay before an insurance company responds to a loss.

For example, if you have an Umbrella Insurance policy with a $20,000 SIR, and you need to make a claim amounting to $100,000, you must first pay the SIR of $20,000 after which the insurance company will take care of the remaining cost, which is $80,000.

Business Insurance

Running a business is challenging enough without having to worry about lawsuits, employee injuries or property damage. Having the right insurance gives you the peace of mind to focus on what matters - running your business.

The coverage you need depends on the type of business you run. A restaurant owner needs to be covered against customers possibly getting food poisoning while an accountant needs to be covered against calculation errors. CoverWallet's intelligent assessment system will identify the insurance you need based on your specific business, get you a policy that fits your budget, and do it all in less time than you think.

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