Umbrella vs Excess Liability: Difference and Comparison

Both umbrella and excess liability insurance policies offer more than existing policies. At the same time, they are also different on several grounds.

So, before you go for an umbrella or excess liability insurance, be aware of all the claims, limits, and coverages. Though both policies increase the limits and shares, they don’t cover specific claims. 

Key Takeaways

1. Umbrella liability insurance extends coverage beyond the limits of underlying policies, while excess liability only increases the limits of a specific policy.
2. Umbrella policies may cover additional risks not included in underlying policies, whereas excess liability provides no additional coverage types.
3. Umbrella insurance is more flexible and comprehensive, while excess liability is focused on supplementing a single policy.

Umbrella vs Excess Liability

Umbrella insurance provides additional liability coverage above and beyond the limits of an individual’s or business’s primary insurance policies. Excess liability insurance provides additional liability coverage, the same as Umbrella, but it does not cover as wide a range of risks as umbrella insurance.

Umbrella liability, in simple words, provides additional coverage that goes beyond the existing auto, home, or other insurance.

Umbrella liability is a safe option for wealthy people, especially those who own large animals (like a horse), have a swimming pool, employ household staff, etc. 

Excess liability helps a person/family exceed the limits of any existing policy. Thus it acts more like an added coverage for any unforeseen or catastrophic scenarios.

Excess liability insurance is highly suggested for business owners because it covers employer liability insurance. 

Comparison Table

Parameters of Comparison	Umbrella Liability	Excess Liability
Definition	Umbrella liability insurance is a type of insurance that covers claims beyond limits that are not covered by other policies.	Umbrella liability can help cover different claims not included in the existing policies.
Coverage	It increases coverage for legal expenses, commercial auto insurance policies, employers’ liability insurance, and excess liabilities on top of the primary insurance.	A wealthy family mainly needs an umbrella liability because they are more prone to lawsuit targets.
Extra Claims	It does not cover any injuries or damages in the case of personal property or when criminal activity is involved.	Excess liability insurance cannot provide extra claims.
Shortcoming	Excess liability insurance is not applicable for multiple policies, additional coverages, and the first line of defence.	It is handy when someone wants to exceed the limit but not add extra coverage.
Customers	It provides coverage not covered by base auto or homeowners policy.	It is compulsory for every business owner as a means of protection.
Importance	Wealthy families mainly need an umbrella liability because they are more prone to targets for lawsuits.	It comes in handy when someone wants to exceed the limit but not add any extra coverage.

What is Umbrella Liability?

 Giving an example of what umbrella liability can do will help better understand the insurance. Imagine if you or your family members accidentally hit someone and caused injuries.

At first, your home or auto insurance will cover the charges and bills; when it is exhausted, the umbrella liability pays the rest. 

Some other similar situations are if your bet accidentally injures or bites someone, being in a severe auto accident, etc.

So, if the total bills sum to $40,000 and your base insurance policy only covers $30,000, then the rest $10,000 is paid by umbrella liability insurance. 

As mentioned earlier, umbrella insurance can also provide added coverage apart from the exceeded limit that base policies cannot cover.

Some of them include false arrest or detention, defamation, invasion of privacy, and malicious prosecution are some of it.  There are also many situations where umbrella liability won’t be used.

Such scenarios are damage to personal belongings, intentional criminal actions, or business losses. 

Umbrella insurance is readily available from the insurers who sell auto and home insurance. It is better to get umbrella liability insurance as it can cover many additional claims not provided by base insurance policies. 

What is Excess Liability?

Excess liability insurance expands the limit of your underlying policies but provides no added coverage. So, it simply extends the higher limit for the dollar bills rather than giving additional claims like umbrella liability.

Excess liability insurance acts as an added layer of protection for every business as it becomes very advantageous in unforeseen scenarios. 

For example, if a family sues your company for any accident or property damage, the total settlement fee is up to $3 million.

In this case, if your original base policy has a limit of $2 million, excess liability can exceed your actual policy limit by another $2 million and thus pay the rest of $1 million.

Excess liability insurance increases the monetary limit of base insurance policies. And these insurance policies are general liability insurance, commercial auto insurance, and employer’s liability insurance. 

Unlike umbrella liability, excess liability will not cover any additional claims not already covered by the existing base policies. It cannot be applied to multiple current liability policies as well.

The cost of excess liability insurance depends on a lot of factors. Some of them are the limit of the policy, the amount that the underlying policy can cover, the type of industry your business is involved in, location, etc. 

Main Differences Between Umbrella and Excess Liability

1. Umbrella liability insurance is a type of insurance that covers claims beyond limits that are not covered by other policies. In contrast, excess liability insurance exceeds the limit but does not provide any extra claims. 
2. Umbrella liability is a type of excess liability insurance but not vice-versa.
3. Umbrella liability covers injuries, property damage, lawsuits (selected), and personal liability situations. In contrast, excess liability covers legal expenses, commercial auto insurance policies, employer’s liability insurance, and excess liabilities on top of the primary insurance. 
4. Umbrella liability does not cover any injuries or damages in the case of personal property or when criminal activity is involved. In contrast, excess liability insurance is not applicable for multiple policies, additional coverages, and the first line of defence.
5. Wealthy families who are more prone to lawsuits should get umbrella liability insurance, whereas, for protection purposes, businesses should get excess liability insurance. 
6. Umbrella liability provides coverage that is not covered by base auto or homeowners policy whereas excess liability comes in handy when someone wants to exceed the limit but not add any extra coverage.

References

1. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/ttip32&section=42
2. https://elibrary.ru/item.asp?id=6101626