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Should You Buy An Umbrella or Excess Policy?

Should You Buy An Umbrella or Excess Policy?

When purchasing liability policies, the large limits of coverage such as $1,000,000 per occurrence and $2,000,000 aggregate may seem like enough. However, in certain circumstances, these limits may not be adequate. While some insurance companies may allow you to increase these limits, that is often the upper limit for most companies. In order to increase these limits you would need to purchase an umbrella or excess liability policy. When Should You Buy This Coverage? Umbrella or excess liability, like other insurance, should not be purchased after a claim has occurred. The policy is usually triggered by bodily injury or property damage that occurred during the policy period. Serious accidents happen. Between legal fees and claims payouts, a liability policy per occurrence or per claim limit can be easily exhausted. Umbrellas and excess policies can pick up where the underlying policy leaves off. What Is the Difference Between Umbrella and Excess? Some brokers use these terms interchangeably, but there are differences between umbrella and excess liability policies. Umbrella policies pick up where liability policies leave off. In addition, they may offer drop-down or gap coverage in the event of a claim where the underlying liability policy does not offer coverage. These policies typically cover over more than one line of underlying coverage. Excess policies do not offer drop-down or gap coverage, but cover the same things the underlying liability insurance covers, in the event the liability policy limits are exhausted. These policies only cover over one underlying policy, usually the General Liability. For either type, it is important that these policies “follow form”. This means the umbrella or excess policy...