Understanding Insurance Terms: Umbrella Policies and Excess Coverage

Umbrella or Excess, and what is the difference?

When you get liability insurance, there is an agreed-upon limit that your policy will cover in the event of a claim. But sometimes, that limit may not be high enough. Increased risk, new project contracts, or other circumstances may require limits exceeding that of your primary liability policy.

Umbrella and excess policies come into play when the coverage limits available for your primary liability insurance may not be enough to fully cover your needs.

The difference between the two is all in the paperwork and details as each is written to be tailored for your unique needs. Speaking with your advisor, you can assess your current coverage and determine which is best for your needs.

Typically, excess liability will offer increased limits to provide coverage above and beyond that of your primary insurance, whereas umbrella policies can offer a broader scope of coverage beyond your underlying policy, providing added insurance for any gaps in coverage.

While excess policies will not expand the terms or scope of coverage the way an umbrella policy may, both will offer increased limits to your regular liability insurance.

What is the purpose of having Umbrella or Excess?

Having an umbrella or excess policy can protect your business and assets in the event of an emergency. In a world where anything is possible, the amount and scope of coverage you have can make all the difference.

There is no simple answer to the common question of how high of limits should one carry on their commercial policy. You can never predict what might go wrong or how much you might be sued for, in a worst-case scenario. One thing is for sure though – you don’t want to be in a position where you need an umbrella/excess policy and don’t have it.

Take this client story as told by one of our Commercial Risk Advisors, Daniel Gilman:

We had a client involved in an accident where the other party sustained serious life-altering injuries, but our client was not fully at fault for the incident. With the percentage of fault in question and a seriously injured other party who would be viewed with sympathy and compassion, we were facing an arduous, lengthy, and expensive lawsuit.

Throughout the process, our client had peace of mind knowing they had high excess/umbrella limits to protect them, as it would be difficult for these high limits to be exhausted. The insurance carrier successfully negotiated a fair settlement to avoid a court battle. Our client was very happy their liability limits were high enough to allow for a smooth settlement.

In the end, the settlement allowed our client to keep their energy focused on running their business, not fighting a lawsuit. It also gave them comfort knowing someone whose life is forever altered will have financial assistance along the way. The insurance carrier remained on the account and did not raise our client’s rates.

While our client’s limits provided proper asset protection and peace of mind, they told us, “We can afford to carry even higher limits. Go higher!”

Protecting what matters

Your business is your livelihood, and your employees depend on the safety and maintenance of your organization and assets. Don’t let the unthinkable become the inevitable.

If you have questions about your coverage and want more information on umbrella or excess policies, reach out to your account manager. Our team at M&G is here to ensure you are protected where it matters most.