As both umbrella and excess liability insurance apply to general and employer's liability, people often use them interchangeably. However, they may be closely similar, but they are not the same in terms of policies and coverages. Here is a guide for you to help you distinguish these two types of insurance.
What is Excess Liability Insurance?
Let us first stop at the simpler one: the excess liability insurance policy - coverage for the exceeded limits of specific liability policy. It can also sit over more than one insurance plan, thus extending the terms and claims you can get from your insurance provider. Meanwhile, it can exactly match the regulations of your underlying policy or be more exclusive, depending on the coverage you want to buy.
For instance, your general liability policy pays $2 million. With an excess liability policy, you can opt to take out an additional $500,000 or even a million dollars. This type of coverage is useful if your claims exceeded $2 million covered by your general liability insurance.
What is Umbrella Insurance?
Although umbrella insurance is also a type of excess coverage, it is not synonymous with excess liability in some notable exceptions. Umbrella insurance provides coverage for small business owners in times of disastrous losses. It also applies to multiple policies (General Liability, Professional, Liability, and Worker's Compensation), just like with the excess liability insurance. Umbrella insurance also works with aggregate limits of your primary policy for you to be able to claim more than the terms stated in your plan.
In this case, you need to pay for self-insured retention (SIR) - the amount for paying out-of-pocket before your insurer responds to the loss. The good news is that SIRs can exceed but do not reduce the limits of its insurance.
The Key Differences
To sum it up, excess liability covers the additional limits to your primary policy without affecting the actual terms of it. Meanwhile, umbrella insurance provides broader coverage than what your underlying plan can afford.
Although this information can give you a general idea about these interchangeable policies, thoroughly reading your insurance terms also helps. Ask for a professional insurance agent if you still find something unclear within your insurance policy.
At Mauser & Tobin Co., Inc, we put our clients first by offering them policies that they can afford. Having insurance is a necessity nowadays, and we're here to help you out. Learn more about our products and services by calling our agency at (516) 747-0171. You can also request a free quote by CLICKING HERE.