Some in the insurance industry will use the terms umbrella and excess liability interchangeably. And both umbrella policies and excess liability policies provide liability insurance in the event that an underlying policy’s limits have been exhausted.
However, there are some differences between an umbrella policy and an excess liability policy.
An excess liability policy reacts when an underlying policy’s limits have been exhausted; essentially, it’s raising the limits of the underlying policies. It covers, though, only those losses that are covered by that underlying policy. For example, let’s say a guest is leaning on the railing on your deck, and the railing gives way and he falls off your deck and breaks his neck. And you’re found liable. Your homeowner policy pays up to the limits on the policy. The excess liability policy picks up once the underlying limits have been exhausted.
An umbrella policy will react in the same scenario above. But a true umbrella policy offers broader coverage, including drop down coverage where it will cover liability from the first dollar. For example, a home insurance policy, unless endorsed otherwise, will typically exclude coverage for personal injury – i.e., libel, slander, false arrest, etc. Where a follow form, excess liability will not respond, an umbrella will.
If you have any questions about your liability limits, or want to discuss umbrellas or excess liability policies in more detail, give us a call at 860-529-1737 or email us at email@example.com.