Excess Liability Insurance

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It’s easy to stick with only the minimum required insurance policy. Doing this certainly seems like it can save you money. While avoiding paying for anything in excess of the minimum coverage may reduce your monthly premiums, it can actually put you at greater risk. The reality is that you can never be too careful with it comes to liability insurance. Even if you have a comprehensive liability policy, you still might be entirely ready for a major catastrophe. That’s why excess liability insurance exists.

What is Excess Liability Insurance?

Excess liability insurance is a policy that has limits in excess of your underlying liability limits. That doesn’t mean that excesses insurance is broader than your underlying liability coverage; you aren’t covered for more types of accidents or incidents. Excess liability coverage simply adds additional limits to your policy.

For example, let’s say you have general liability policies with coverage up to $100,000. If you’re in an accident that causes $125,000 in damages, your liability insurance provides only the initial $100,000 in coverage. You would be personally responsible for the remaining $25,000. This remaining amount is known as excess in insurance. Adding additional coverage to the original plan could include an excess liability policy that would cover the remaining $25,000.

An excess liability insurance policy is meant to fill in the gaps left over from your primary coverage. You could think of this insurance as being an insurance plan for your insurance plan. Moreover, insurance for excess can often work with more than one underlying plan. That means multiple policies can be covered by a single excess policy.

There are some limitations to what your additional coverage can actually cover. For example, there are many kinds of professional liability plans, like errors and omissions, that cannot be enhanced with an excess policy.

It’s always wise to talk with your insurance company to fully understand if and how your underlying policies can be improved with excess liability insurance policies.

Excess Liability Coverage vs. an Umbrella Policy

Many drivers believe that excess liability and an umbrella policy are the same things. Even insurance companies will often use these two terms interchangeably. There are definitely some similarities between these two types of coverage, but there are also significant differences in how they each work.

Excess Liability Insurance adds limits beyond your underlying coverage, but it does not affect the terms of the policy. If your general liability insurance policy doesn’t cover damage from a fire, your excess liability will also not cover damage from a fire. It will increase the overall maximum coverage allowed.

Umbrella Policies offers broader coverage than what your underlying insurance provides you. If your general liability insurance plan doesn’t cover damage from a fire, your umbrella policy can add fire damage to your overall coverage.

Can I Stack Insurance Limits?

The idea of stacking insurance is when your business has multiple insurance policies, and you apply the policy limit of each plan to the loss from damage incurred over two or more periods. Stacking can initially sound confusing, but it is fairly standard practice when appropriate.

For example, let’s say a trucking company owns multiple semi-trucks, and each truck is on the same commercial insurance policy. Each policy has a set limit. Stacking is when the limits of each of the policies are combined to create a higher composite limit. Suppose your company has a general policy for each of it’s three big rigs. Each policy has a limit of $100,000 in coverage. Stacking would all you to claim up to $300,000 to cover expenses from an accident. In a way, stacking is combining limits across policies to create another form of excess liability insurance.

Stackable insurance policies may seem like they are more convenient, but they do come with a higher price tag. These policies can also be rather complicated when there are multiple incidents. Some insurance providers don’t allow stacking to ensure policies don’t get too intertwined.

What is a Self Insured Retention?

This is the dollar amount specified in an insurance that is paid by the insured before the insurance company responds to a loss.

How Much Are Excess Liability Insurance Policies?

The actual cost of purchasing extra liability policies depends on the cost of the underlying policy to which it’s being applied. Since there are so many factors involved in determining the cost of your foundational liability policies, it’s impossible to get a realistic quote without first talking to your insurance provider.

Hypothetically, if your trucking company had a policy that provided $1 million in coverage at $150 per month, it might be able to get another $1 million in additional coverage for $100 per month. Another $1 million in insurance what is excess coverage could come down to $75 per month. The actual number will be vastly different, but the concept is typically the same.