Difference Between Umbrella and Excess Liability

Umbrella vs Excess Liability

Umbrella and excess liabilities refer to two different types of insurance policies. These insurance policies are used for increasing the limits of liability above the underlying policies. The need to use umbrella and excess liability arises due to many reasons. Some of them are:

When the organization or business expands due to varied reasons like a merger or internal growth and the former insurance does not cover the liability exposures.
Sometimes a major jury verdict or decision by an appellate court requires the organization to increase their liability limits.
Sometimes when the top management changes, the management decides to increase their liability limits.

On asking for new and higher limits, the insurance and liability carriers offer either umbrella liability or excess liability insurance above their pre-existing underlying liability.

Umbrella Liability
Umbrella liability is a type of liability which provides additional limits over the underlying liability. It increases the limits of each liability policy in an organization or business. The biggest advantage of umbrella liability is that it may also provide coverage which was not originally available in the underlying coverage. Umbrella liability helps in broadening the business insurance liability so that the gaps in the coverage are closed and eliminated. It offers first-dollar-liability coverage which is above any self-insured retention or retained limit.

Excess Liability
Excess liability insurance also provides additional limits over the underlying liability, but they are more restrictive. It provides overlays over the already existing insurance policy by increasing or adding to the per person or per occurrence limits. The excess liability incorporates all the definitions and limits of the already existing underlying policies and does not have any effect on any other insurance policy the business might have. One of the disadvantages of excess liability is that sometimes it is so restrictive that it may have more restrictions than the underlying coverage.
One should always read the fine print before signing up for any insurance policy and liability as an informed decision is necessary to protect the business from any kind of third-party claim.

Summary:

1.Umbrella liability provides additional limits over the underlying liability. It increases the limits of each liability policy in an organization or business. It may also provide coverage which was not originally available in the underlying coverage. Excess liability is very restrictive and may be more restrictive than the underlying liability.
2.Umbrella liability helps in broadening the business insurance liability so that the gaps in the coverage are closed and eliminated. It offers first-dollar-liability coverage which is above any self-insured retention or retained limit; excess liability incorporates all the definitions and limits of the already existing underlying policies and does not have any effect on any other insurance policy the business might have. It does not broaden the limits.

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