What Is the Difference Between Excess and Umbrella Coverage?

Excess and umbrella coverage are additional protection to existing insurance coverage. While most people use the two terms interchangeably to mean the same thing, they serve different needs.

Depending on your risk profile, you may need umbrella coverage to complement auto, homeowners’, or business insurance protection.

On the other hand, excess liability insurance acts as a secondary form of coverage, which may act as a backup plan if the losses exceed the limit of an underlying insurance policy.

Consider speaking to a trusted Northridge, CA, insurance provider who can evaluate your risk profile and establish your need for excess or umbrella coverage.

Common Underlying Policies

Many businesses already have underlying policies that match their risk profile. Whether you buy excess or umbrella coverage, it only provides additional liability protection. More importantly, an umbrella or excess policy doesn’t offer additional protection to property insurance plans.

Here are a few examples of insurance underlying policies:

• General liability
• Professional liability
• Commercial Auto Liability
• Workers’ compensation liability
• Industry-specific liability covers

How Does Excess Coverage Work?

An excess insurance is a separate insurance from the original insurance plan. For example, if an employer has excess workers’ compensation insurance, they would pay for two packages: the workers’ compensation insurance and their excess policy.

Here’s how it works.

Suppose a business owner has a commercial auto liability cover with an incident limit of $1,000,000, covering bodily injury and property damage with limited protection of the United States and its territories.

If they buy an excess policy with an additional $1,000,000 coverage, it will follow the same coverage as the underlying commercial auto liability with similar limitations and exclusions.

How Does Umbrella Coverage Work?

Umbrella insurance offers slightly more comprehensive coverage by offering blanket coverage over underlying policies. You can think of an umbrella cover as asset protection because it can prevent you from selling an asset to pay a settlement in case a judgment doesn’t favor you.

Most umbrella covers have a deductible or a retention limit, which could be as low as $1,000 and up to $10,000— an inbuilt policy that applies where the underlying insurance plan excludes coverage. In such a case, the policyholder would pay the retention limit, and then the umbrella policy would take charge and provide coverage.

Should You Buy Excess or Umbrella Coverage?

Excess coverage can provide the necessary additional protection. Consider examining your underlying coverages if you’re concerned about potential losses. Whether you buy excess or umbrella coverage, ensure it provides sufficient protection to minimize risk exposure.

Get in Touch With an Experienced California Insurance Agency to Manage Your Risk Exposure

If an employee sustains an injury, the workers’ compensation insurance can cover the injury-related expenses up to the cover’s limit. Unfortunately, the court may compel you to pay the balance if the settlement exceeds your liability coverage.

Consider speaking to an experienced insurance professional from Panorama Insurance Agency who can assess your risk profile and recommend enhanced coverage.

Contact us online to request a free quote.