What’s the Difference Between Umbrella and Excess Liability Insurance? 

excess liability

Third-party litigation funding, anti-corporate sentiment among juries, and other factors have created an environment over the last decade or so in which huge settlements and awards are commonplace. Third-party litigation funding is the practice of investors’ buying an interest in the outcome of a lawsuit and has quickly become a multibillion-dollar industry, contributing to the upward cost of awards and settlements. Hedge funds, institutional investors, and public and private companies have poured billions of dollars into funding litigation.

As a result of higher settlements and awards, the Liability limits on primary policies such as General Liability and Truck Liability insurance often are not enough to protect against multimillion-dollar lawsuits. This is where Umbrella and Excess Liability policies step in. It’s important to note, however, that these policies are not the same, although they are often used interchangeably by many.

What Is Commercial Umbrella or Excess Insurance?

Umbrella, or Excess, insurance protects a firm against unexpected, catastrophic, liabilities that can have a devastating impact on its business. The policy provides additional limits above and beyond those provided by your primary, underlying policies. If you have a General Liability policy with a limit of $1 million and you purchase Umbrella insurance with a $2 million limit, you will have a total of $3 million in Liability limits for a covered event. Once the primary policy limits are exhausted, the extra limits kick in.

Umbrella vs. Excess Insurance

Umbrella insurance differs from Excess Liability policies in that an Umbrella policy, as its name implies, provides higher limits of coverage over ALL of the liability exposures. Traditionally this is General Liability,  Auto Liability, and Employers Liability. Newer exposures like Cyber Liability and Employment Practices Liability may also get included in the Umbrella. It may also offer worldwide coverage that is frequently broader than the coverage territory found in the underlying Liability policies.

Excess Liability insurance in most cases does not provide broader coverage than the underlying policies and, in general, adheres to the conditions of the underlying policies.  These excess policies are typically selected for a specific line of coverage only (i.e., Auto Liability or General Liability)  and these policies follow the same coverage forms and the primary policy.  It is quite common for people to say Umbrella coverage when, in fact,  they are really just referring to Excess Liability.   In the Trucking industry Excess coverage over the General Liability is usually relatively inexpensive compared to the cost of Excess coverage over the Auto Liability.

No matter which option is considered Trucking businesses that have assets to protect, whether they are equipment, receivables, goodwill, or reputation, need to have higher limits than the standard $1 million occurrence limit in today’s litigious climate. Talk to your broker and get quoted.

About Western Truck Insurance Services

Western Truck Insurance Services is an insurance brokerage specializing in commercial truck insurance. We know this stuff and want to make sure you do too. Our clients appreciate our dedication to finding competitive rates and offering unparalleled service beyond excellent insurance options. They also value how our state-of-the-art automation provides lightning-fast truck insurance quotes, customer service, insurance certificates, and coverage changes. Contact us today at (800) 937-8785 to learn more.