Difference Between Umbrella and Excess Liability (With Table)

Both umbrella and excess liability insurance policies offer more than the already existing policies. At the same time, they are also different on several grounds. So, before you decide to go for an umbrella or excess liability insurance, be aware of all the claims, limits, and coverages. Though both policies increase the limits and claims, they also don’t cover certain claims. 

Umbrella vs Excess Liability

The main difference between an umbrella and excess liability insurance is that umbrella liability can expand the claims that are not covered by the underlying policies as well as provide broader coverage. On the other hand, excess liability does not expand the terms of the underlying coverage but exceeds the limit as a layer of protection. 

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 also covers employer’s liability insurance. 

Comparison Table Between Umbrella and Excess Liability

Parameters of ComparisonUmbrella LiabilityExcess Liability
DefinitionUmbrella liability insurance is a type of insurance that covers claims beyond limits that are not covered by other policies. The excess liability insurance works more like an extra layer of protection for situations when other insurance is exhausted. 
CoverageIt provides coverage for any injuries, damage to properties, lawsuits (selected), and personal liability situations. It increases coverage for legal expenses, commercial auto insurance policies, employers liability insurance, and excess liabilities on top of the primary insurance. 
Extra ClaimsUmbrella liability can help cover extra claims that are not included in the existing policies.  Excess liability insurance cannot provide extra claims. 
ShortcomingIt does not cover any injuries or damages in the case of personal properties or when criminal activity is involved. Excess liability insurance is not applicable for multiple policies, additional coverages, and the first line of defense. 
CustomersA wealthy family mostly needs an umbrella liability because they are more prone as lawsuit targets. It is compulsory for every business owner as a means of protection. 
ImportanceIt provides coverage that is not usually covered by base auto or homeowners policyIt 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 cover will help in a better understanding of the insurance. Imagine if you or any of your family members accidentally hit someone and cause injuries. At first, your home or auto insurance will cover the charges and bills and when it is exhausted, the umbrella liability pays the rest. 

Some of the other similar situations are if your bet accidentally injures or bits someone, being in a serious auto accident, etc. So, it is like 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, apart from the exceeded limit that cannot be covered by base policies, umbrella insurance can also provide added coverages. Some of them include any 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 of any use. Such scenarios are damage to any 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 any base insurance policies. 

What is Excess Liability?

Excess liability insurance expands the limit of your underlying policies but does not provide any added coverage. So, it simply extends the higher limit for the dollar bills rather than providing 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 and the total settlement fee sum up to $3 million. In this case, if your original base policy has a limit of $2 million, excess liability can exceed your original policy limit by another $2 million and thus pay the rest $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 that are not already covered by the existing base policies. It cannot be applied to multiple existing 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 can be covered by the underlying policy, 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 whereas 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 provides coverage for any injuries, damage to properties, lawsuits (selected), and personal liability situations whereas excess liability provides coverage for legal expenses, commercial auto insurance policies, employers 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 properties or when criminal activity is involved whereas excess liability insurance is not applicable for multiple policies, additional coverages, and the first line of defense.
  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 usually 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.

Conclusion

Before buying either umbrella or excess liability insurance, make sure you properly check the details of the policies. One can buy either of the insurance from companies that provide basic auto or home insurance. 

If you or your family is involved in a business that is prone to more injuries or accidents, excess liability will always provide that extra layer of protection. Umbrella liability, on the other hand, gives extra claims that aren’t mentioned in the base policies but are not fit for businesses. 

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

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Editorial Staff at Ask Any Difference is a team of experts in the field of "Difference Between" topics and led by Sandeep Bhandari, Piyush Yadav and Chara Yadav. Trusted by over 1.5 million readers worldwide
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