Umbrella vs. Excess Liability Insurance Policies

October 29th, 2008
by Drew Roberts, CPCU, ARM

Umbrella and excess liability policies are used to increase the liability limits above the underlying policies of your landscaping business. The basic distinction between excess liability insurance and umbrella liability insurance is:

  • Excess liability policies are designed to provide coverage above the limits of the underlying coverage. It offers no broader protection than that provided by the underlying policy. In fact, the excess liability coverage may even be more restrictive than the underlying coverage.
  • Umbrella liability policies are a type of excess liability that not only provide additional limits (as excess liability policies do) but also provide coverage not available in the underlying coverage. When additional coverage is provided by the umbrella liability policy, it is usually subject to the insured’s assumption of a self-insured retention, or retained limit.

The image below demonstrates the basic difference between excess and umbrella liability policies. In this example, both the excess liability policy and the umbrella policy provide $1 million of additional liability coverage for the same losses covered by the underlying policies. In addition, the umbrella policy covers some losses not covered by the underlying insurance, subject to a self-insured retention of $25,000.

Diagram of Umbrella vs Excess Liability Coverage

Diagram of Umbrella vs Excess Liability Coverage

Most umbrella and excess liability policies are not written on standardized forms, so it is always important to read your policies to see what they actually cover. In actual practice, the line between excess and liability coverage is often blurred. Many excess liability policies are referred to as umbrella policies and since the coverage definitions are developed by individual insurance companies, umbrella and excess liability policies can vary greatly in what they actually cover. Another thing to note is that most excess and umbrella policies are written as a self-contained policy, but some are written as a following-form. In following-form policies, the coverage is not defined and simply stated that it applies only if the loss is covered by the underlying insurance.

If you ever have any questions regarding excess or umbrella liability policies for your landscaping business, please do not hesitate to contact an agent at BearWise Landscapers.

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