Most business owners protect their assets with insurance. These insurance policies are designed to protect against losses of equipment, products, and other business assets. While there are many commercial insurance products to consider, excess liability insurance is available to protect against situations and incidents that may not be covered by a general liability insurance policy. In this blog post, we will explore excess liability and the options available to business owners.
What is Excess Liability Insurance?
In simple terms, excess liability insurance is an insurance product that provides limits in excess of an underlying general liability insurance policy. It may be used as an additional layer of financial protection, such as over a general liability policy or an umbrella insurance policy. In other words, it works like insurance for your insurance.
These excess liability policies are great for businesses that may have low limits on their existing insurance policies. They are also ideal for so-called “high risk” professions, where the risk of liability and its costs are higher. These include medical professionals, financial advisors, and attorneys, among others.
Umbrella Liability Vs. Excess Liability
There is some confusion about the terms “umbrella insurance” and “excess liability insurance”. Many companies use the two terms interchangeably, and while there are many similarities between the two types of insurance products, important distinctions keep them separate.
Umbrella liability insurance protects against policyholders having to pay claims once their underlying insurance limits have been reached. This coverage can be extended to a number of other underlying policies, including general liability insurance, commercial auto insurance, and even employers’ liability insurance.
Excess liability insurance, on the other hand, also provides coverage in excess of a primary insurance policies limits, but it can only be applied to the primary policy and does not offer any broader protections for unforeseen litigation and claims.
Choosing between the two types of supplemental insurance can be difficult. Most insurance experts agree that excess liability insurance is better for those with substantial risks in one particular area, such as employees who might file a negligence lawsuit, while umbrella liability insurance is a good choice for companies that have exposures to several different risk factors.
Umbrella insurance tends to be more flexible, making it a more attractive option in many cases.
Is it right for me?
An insurance provider can help businesses if excess liability insurance is warranted. For companies that have fewer financial assets, this insurance may not make sense from a financial perspective, as it is an additional cost. However, if a business has substantial assets and falls into a single risk category, it makes sense to set aside expenses to pay for this extra coverage. It protects against out-of-pocket expenses that arise when primary insurance limits are reached. Talk to a commercial insurance agent today to see if this excess coverage is needed to protect your business from the expenses associated with litigation.
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