Umbrella Insurance and Excess Liability Insurance: Why Are They Needed

It’s good to know all your options when it’s time to get insurance. Some people take on more risks than others, so they need coverage beyond a basic plan. Options that can provide extended coverage include umbrella insurance and excess liability insurance.

What Is Excess Liability Insurance & Umbrella Insurance?

A basic insurance policy only covers so much and may not provide enough coverage for an individual or business. The two main options to extend coverage beyond your standard policies are to add excess liability to the policy through endorsements or to get an umbrella plan that offers broader coverage.

Both excess liability and umbrella insurance are helpful in customizing your insurance plan. These plans are also typically affordable, but prices vary from carrier to carrier.

An umbrella policy can extend liability coverage for claims involving injuries to others, not the policyholder. It pays for a broader range of legal issues than a standard liability plan. An example is if you prepare food for a third party and they become ill. Either excess liability or umbrella insurance can pay for the hospital bills.

Who Needs Extended Coverage?

Small businesses can benefit the most from excess liability or umbrella insurance. It’s particularly advantageous for a niche business with its own set of risks that are markedly different from common businesses. Umbrella coverage is like a miscellaneous category for different types of coverage not typically found in basic business plans. It comes down to the insurance provider as to what they offer in their extended coverage plans.

Homeowners may also benefit from these extended coverage plans since standard homeowners policies only cover the basics. You can use excess liability or umbrella coverage to ensure all your valuable possessions are completely covered. A basic plan, for example, might not cover all your jewelry or computing equipment, whereas extended plans will.

Renters may benefit from an umbrella policy since it typically provides more exhaustive coverage than a renters insurance policy. Whether you’re a homeowner or renter, you can use umbrella coverage to extend liability to reduce legal exposure, such as if your dog attacks someone, causing injuries that need medical treatment.

Key Differences Between Excess Liability and Umbrella Insurance

An excess liability policy provides coverage beyond a basic policy’s limits. It can apply to different types of liability plans, such as professional liability or general liability insurance. However, excess liability does not affect the original policy’s terms.

Umbrella insurance is not the same thing but can be considered a form of excess insurance. It’s usually designed for small businesses to protect against multiple risks. Umbrella plans fill in coverage gaps and sometimes cover claims not listed as perils.

How Can You Stack Insurance Limits?

A business that carries multiple policies may engage in stacking insurance limits. This means applying the policy limit of each policy to a loss over multiple policies and periods. Many insurance companies use anti-stacking clauses to discourage the practice.

Do you need help navigating the complexities of business insurance? Our experts can help you find the right plan that works for your operation. Contact us at RMS Insurance for more information on the various coverage options available for your business.