Excess Liability Insurance Simplified

Excess liability insurance and umbrella insurance are one of the most important types of insurance your company can buy. It protects your business from claims that exceed your primary policy coverage. Excess liability insurance protects your company from the types of claims that could close or bankrupt your business.

Excess Liability Insurance Basics

Businesses choose excess liability insurance to back up the limits contained in their underlying liability policies (commercial general liability, business auto, professional liability etc.) For the most part, it is used to cover exceptionally large events or losses with low probabilities of occurrence. Without excess liability insurance, these events may be financially devastating to many businesses.

Who Should Consider Excess Liability Insurance?

All types of companies would benefit from excess liability insurance because there is always a chance a lawsuit could exceed the limits you have in place and it extends coverage at a relatively small additional cost (often $600-$1,000 for each additional $1,000,000 of coverage).

2 Types of Excess Liability Insurance Coverage

Ultimately, there are two types of excess liability insurance and there is an important difference between excess liability insurance and umbrella liability insurance. Excess liability insurance pays for claims in excess of existing policy limits based on the underlying scope of coverage only or what is often referred to as on a follow form basis. Separately, the umbrella liability insurance serves three purposes:

  • it provides excess limits when the limits of underlying liability policies are exhausted by the payment of claims;
  • it drops down and picks up where the underlying policy leaves off when the aggregate limit of the underlying policy in question is exhausted by the payment of claims; and
  • it provides protection against some claims not covered by the underlying policies, subject to the assumption by the named insured of a self-insured retention (SIR).
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100% Canadian owned, ALIGNED is a premiere insurance brokerage that serves more than 1,400 clients across the country. ALIGNED’s offices in Toronto, Calgary and Vancouver are supported by a national operations centre in Cambridge, Ontario. Uniquely within the industry, ALIGNED creates, negotiates and delivers the best business insurance and risk management strategies/solutions to organizations like yours.

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