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Commercial Umbrella vs. Excess Liability Insurance – What Sets Them Apart?

Navigating the world of commercial insurance can be complex, especially regarding liability coverage. Two common types of coverage that businesses often consider are commercial umbrella insurance and commercial excess liability insurance. Let’s explore the differences between these two types of policies and help you determine which one may be best suited for your business’s needs.

What Is Commercial Umbrella Insurance?

Commercial umbrella insurance provides additional liability coverage beyond the limits of your primary commercial general liability (CGL) policy. It acts as a “safety net” for your business, offering protection against catastrophic losses that exceed the limits of your underlying insurance policies.

What Is Commercial Excess Insurance?

Commercial excess liability insurance, also known as excess liability coverage, serves a similar purpose to umbrella insurance. It provides additional coverage above and beyond the limits of your primary liability policies, such as your CGL policy. However, unlike umbrella insurance, which may offer broader coverage enhancements, excess liability insurance typically mirrors the terms and conditions of your underlying policies.

What Is Underlying Insurance?

Underlying insurance refers to your primary insurance policies, such as your commercial general liability (CGL) policy, commercial auto insurance, or commercial property insurance. These policies provide the foundation of coverage for your business, and the limits of these policies determine how much coverage you have in place before your umbrella or excess liability insurance kicks in.

How Are Commercial Umbrella vs. Excess Liability Policies Different?

While commercial umbrella and excess liability insurance serve similar purposes, there are some vital differences between the two:

  • Coverage Enhancements: Commercial umbrella insurance often provides broader coverage enhancements than excess liability insurance. Umbrella policies may offer additional coverage for risks not covered by your underlying policies, while excess liability policies typically mirror the terms and conditions of your underlying policies.
  • Aggregate Limits: Umbrella insurance may have its own separate aggregate limit, which is the maximum amount the policy will pay out over the policy period. In contrast, excess liability insurance typically shares the same aggregate limit as your underlying policies.
  • Cost: Due to its broader coverage enhancements, umbrella insurance may be more expensive than excess liability insurance. However, the cost of both policies will depend on various factors, including the size and nature of your business, industry, and risk profile.

Which is Better? An Excess Policy or Umbrella Policy?

There is no one-size-fits-all answer to this question, as the best option will depend on your specific business needs and circumstances. Some businesses may benefit from the broader coverage enhancements offered by commercial umbrella insurance, while others may prefer the more straightforward approach of commercial excess liability insurance. It’s essential to carefully evaluate your risks and coverage requirements with the help of an experienced insurance agent to determine the best option for your business.

How Does an Umbrella or Excess Policy Work?

Both commercial umbrella and excess liability policies work by providing additional coverage above and beyond the limits of your underlying insurance policies. If a covered claim exceeds the limits of your underlying policies, your umbrella or excess liability insurance will kick in to provide additional financial protection for your business.

Who Needs Excess or Umbrella Liability Protection?

Any business that faces potential liability risks should consider purchasing excess or umbrella liability protection. This includes businesses of all sizes and industries, from small local businesses to large multinational corporations. Having adequate liability coverage is essential for protecting your business’s assets and financial stability in case of a lawsuit or catastrophic loss.

Common Mistakes When It Comes to Umbrella and Excess Policies

One common mistake businesses make is assuming that their underlying insurance policies provide sufficient coverage without considering the potential for catastrophic losses that exceed those limits. Another mistake is failing to regularly review and update their insurance coverage to ensure it aligns with their evolving business needs and risk profile. Working with an experienced insurance agent can help you avoid these and other common pitfalls.

McCarty Insurance Agency Can Help You Find the Right Commercial Insurance Coverage

If you’re unsure whether commercial umbrella or excess liability insurance is right for your business, contact us today. Our experienced agents at McCarty Insurance Agency can help you assess your risks, evaluate your coverage needs, and find the right insurance solutions to protect your business’s financial future. Call us at (559) 324-1421 to get started.

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