Understanding Excess Liability Coverage and Its Benefits

Excess liability coverage is a type of insurance that kicks in when your underlying insurance policy limits are reached. This means that if you're involved in a lawsuit and your primary insurance policy can't cover the full amount of damages, excess liability coverage can help fill the gap.

Having excess liability coverage can give you peace of mind, especially if you have a lot of assets to protect. According to one study, a single lawsuit can cost upwards of $1 million in damages, which is why excess liability coverage can be a lifesaver.

Excess liability coverage can be tailored to fit your specific needs, with options ranging from $1 million to $10 million or more in coverage. This allows you to choose the right level of protection for your unique situation.

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Excess liability coverage is a type of insurance that increases the limits of an existing insurance policy, usually a commercial general liability insurance policy.

It's designed to bridge the gap between a standard policy and the association's exposures, providing more protection in case of a lawsuit or settlement.

Excess liability insurance does not expand on an association's current policy, but rather offers a higher dollar limit to protect the group in the case of a claim with costs reaching above the amount of their existing policy.

For example, if an HOA has a general liability policy with a $1 million limit but faces a lawsuit and settlement of $1.5 million, they would have to dip into other assets to pay the settlement.

Having an excess liability policy that increases the limit to $2 million would give the HOA enough money to pay the settlement without depleting their other assets.

Essentially, excess liability coverage can be thought of as insurance for your insurance, providing an added layer of protection in case of a large claim.

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Excess liability coverage can be offered by your insurance provider, and it's worth checking with them to see if they offer it. If they do, it's likely to be more affordable than purchasing it from another company.

You can also consider purchasing excess liability coverage from other companies if your provider doesn't offer it. Some examples of companies that offer excess liability coverage include those mentioned in the article.

It's worth noting that excess liability coverage is designed to provide additional protection for a specific liability insurance policy, such as general liability insurance. This means that it's meant to back up only one underlying policy, rather than providing coverage for multiple policies like an umbrella policy.

Here are some key differences between excess liability and umbrella insurance:

Keep in mind that it's essential to work with an insurance broker or agent to understand the specifics of an excess liability policy, as the terms can be nuanced and may not be clearly understood by the general public.

Umbrella insurance can be applied to multiple existing liability policies, covering claims not included in the existing policies.

Business umbrella insurance requires meeting a special type of deductible called "self-insured retention", or SIR, before the insurance company will respond to the loss.

If you have an SIR on your umbrella policy of $10,000, you would pay $10,000 out-of-pocket, and the insurance company would cover the remaining amount.

Excess liability insurance, on the other hand, typically has a deductible equal to the liability limits on the primary policy, meaning you don't have to pay anything out of pocket to access the additional limits.

An umbrella policy usually provides coverage for more than one underlying policy, while an excess liability policy is meant to back up only one underlying policy.

Here's a comparison of the two:

Excess liability coverage comes in different forms, and one of them is surplus lines insurance. This type of coverage is sold by non-admitted insurance carriers to insure businesses with higher than normal risks.

You might also see it called E&S insurance, surplus lines insurance, or excess lines insurance. It's worth noting that these policies don't have the same financial backing as standard insurance policies.

The carriers selling surplus lines insurance are allowed greater flexibility in their insurance solutions for businesses. This flexibility can be beneficial for businesses with unique risks or exposures.

If your insurance provider doesn't offer excess liability coverage, or you want to compare rates, you can consider surplus lines insurance as an option.

A fresh viewpoint: Excess vs Umbrella Insurance

Excess liability coverage is worth considering if you're a small business owner with a high-risk operation, such as a construction or building company. This type of insurance helps protect your business from catastrophic losses and claims that exceed the coverage limits of your liability policy.

Your business needs excess liability coverage if you face substantial risks, like a high degree of foot traffic, handling hazardous materials, or personal injury claims.

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Some businesses that often require excess liability coverage include construction, manufacturing, and transportation companies. These industries often deal with hazardous materials or have a high risk of accidents, making excess liability coverage a necessary layer of protection.

Consider your business operations, risks, and budget to determine if excess liability coverage is right for you. If you're unsure, consult with an insurance expert or business attorney for advice.

Here are some factors to consider when deciding whether to purchase excess liability coverage:

Excess liability coverage is designed to provide additional financial protection beyond what's offered by your primary insurance policy. It's an add-on to existing policies, but what it covers depends on the underlying policy.

Excess liability only applies to a single policy, so if you add it to your auto insurance, for example, it can only increase the limits on that particular policy. This means you can't use excess liability to cover claims that aren't already covered by your primary policy.

An excess liability policy sits in the background until the underlying policy's limits have been exhausted. The excess liability insurance policy will kick in once the underlying policy hits its coverage limits.

Here's how it works in practice: let's say you have a general liability policy with a $1 million limit, and an excess liability policy with another $1 million in coverage. This gives you a total of $2 million in general liability coverage.

If a claim exceeds the original policy limit, the excess liability insurance policy will cover the remaining amount up to its policy limits. For example, if you have to pay a settlement of $1.5 million, your excess liability coverage would kick in to cover the $500,000 that exceeds your original policy limit of $1 million.

It's worth noting that owning an excess liability insurance policy will limit the instances where your company is underinsured, but it doesn't guarantee you'll never have to pay out of pocket. If a large enough claim hits the underlying insurance policy and the excess policy's limits, you could still be liable for the difference remaining on a claim.

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Here are some key things to keep in mind about excess liability insurance:

The cost of excess liability insurance can vary widely depending on several factors. Generally, the higher the limit you're looking for, the higher the cost.

According to Gordon Atlantic Insurance, the cost of a commercial excess liability policy is typically $1,000 annually for every million dollars of insurance. This means that if you're looking for a $3 million policy, it will cost $3,000 per year or $250 per month.

Smaller businesses with fewer risks can find costs as low as $200 to $400 per year, as mentioned on money managing site howmuch.net. Your industry and risk level will also play a significant role in determining the cost of your excess liability policy.

Here are some factors that can affect the cost of excess liability insurance:

Keep in mind that the cost of excess liability insurance can vary depending on your specific business needs and circumstances. It's essential to shop around and compare quotes from multiple insurance providers to find the best coverage for your business.

The cost of excess liability insurance is influenced by several factors, including the limits of the policy, the amount of your underlying policy, and your industry and perceived risk level. Generally, the higher the limit you're looking for, the higher the cost.

The cost of a commercial excess liability policy is typically $1,000 annually for every million dollars of insurance, according to Gordon Atlantic Insurance. This means that if you're looking for a $3 million policy, it will cost $3,000 per year or $250 per month.

Your business's industry and risk level play a significant role in determining the cost of excess liability insurance. For example, construction business insurance is likely to be more expensive than business consultant insurance due to the greater risk of general liability and employer's liability claims in construction.

Smaller businesses with fewer risks can find costs as low as $200 to $400 per year, but this can vary widely depending on the specific factors of your business.

Here are some factors that can impact the cost of excess liability insurance:

A higher limit means higher costs, so it's essential to carefully consider your business's needs and budget when selecting an excess liability policy.

You have several options for excess liability coverage, but it's often most convenient to get it from your existing insurance provider. They may be able to offer a policy quickly or at a lower rate than other companies.

If your provider doesn't offer excess liability or you want to compare rates, consider reaching out to other companies that specialize in this type of coverage.

You can purchase excess liability insurance from the same company that holds your underlying policy, such as your general policy insurance carrier or commercial auto insurance carrier. This is often the most cost-effective option.

If you do decide to go with a different company, be prepared to pay more for the policy.

Here are some companies you may want to consider:

Keep in mind that while it's possible to get an excess liability policy from another carrier, you may end up paying more for the policy than if you went with a carrier that underwrites both policies.