Exploring The difference between umbrella and excess liability coverage

Commercial liability insurance is a complex world with a lot of different information to wade through and make sense of. It can be overwhelming when you’re trying to find the right kind of coverage and policy for your small business. And of all the types of commercial liability insurance, some of the most difficult to understand are umbrella liability coverage and excess liability coverage.

At Independent Insurance Associates, we offer both types of coverage and our clients are often curious to know the difference between the two. So, let’s compare and contrast these types of coverages so that you can begin to decide the best way to protect your small business.

What do they do?

Umbrella and excess liability coverage are designed to provide coverage outside of the limits of your underlying coverage. Although their base definition is similar, there are some key differences between them that you should consider when choosing which one is right for you.

Umbrella policies provide higher liability limits and also broaden the coverage in the event that something happens that your underlying policy might not cover. Excess liability policies, on the other hand, offer higher liability limits when your underlying policy has reached its maximum, but do not broaden the coverage. Both help in the event of an extreme catastrophe that your underlying coverage does not cover.

What is the difference?

The main difference between umbrella policies and excess liability policies is in the way that they broaden the coverage. Umbrella policies are actually a form of excess liability coverage. Everything that you get with an excess liability policy, you get with an umbrella policy, with more added on.

With an umbrella policy you can apply the coverage to multiple underlying liability policies, including general liability insurance, employers liability insurance, and commercial auto insurance. This can be hugely beneficial when your business has multiple high-risk areas.

Umbrella policies also offer broadened coverage that your underlying liability policies might not cover. This can mean expanding the coverage to include more areas geographically, or having different terms from your underlying coverage. Often times, umbrella coverage will have different terms, conditions, and exclusions while excess liability coverage will reflect the terms, conditions and exclusions of the underlying policy.

Which one do I need?

The answer completely depends on the needs of your small business. Businesses that might need either of these kinds of coverage face high liability risks, such as having a location with a high amount of traffic, or a large number of heavily used company vehicles. They also might have a high amount of liability to work with clients or just need a greater amount of coverage with a limited budget. If either one or all of these applies to your business, you should talk to an agent to see how these policies could benefit you.

Each small business is unique and has their own needs. If you are looking for a way to expand the coverage of your underlying policy, you should consider an umbrella or excess liability coverage policy. The one that is right for your business can be found by one of our local commercial insurance agents who can review your business’ needs and determine the right choice for you.