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.