Excess liability vs. umbrella liability insurance

Excess liability insurance and commercial umbrella liability insurance both provide extra layers of financial protection when a claim exceeds your primary policy limits. The main difference is that excess liability only increases the coverage limits of one specific policy, while umbrella insurance extends the limits to multiple underlying policies.

Here's a closer look at how these two extended coverage policies work:

Excess liability insurance provides additional coverage limits to one primary liability policy. This coverage comes in once the policy limits of the underlying policy have been exhausted. Excess liability is often added to policies like:

• General liability insurance: If a third-party bodily injury or property damage claim exceeds your general liability policy limits, excess liability will help cover additional expenses, including costs for lawsuits, settlements, judgments, and some product liability claims involving bodily injury.
• Professional liability insurance: Should a client claim that your error, missed deadline, or professional negligence caused them to lose money, excess liability will extend professional liability policy limits to cover attorney fees, settlements, and other legal costs. This coverage is also called errors and omissions (E&O) insurance.

Umbrella liability insurance sits atop several liability policies at the same time. It will raise the policy limits for whichever underlying liability policy is exhausted by a claim, including:

• General liability insurance: Umbrella insurance will provide additional coverage for common business risks, including slip-and-fall injuries and customer property damage, that can exhaust your underlying general liability coverage.
• Commercial auto insurance: If your business vehicle is involved in an accident, an umbrella policy can increase your auto coverage to help pay for legal bills, medical expenses, and property damage.
• Hired and non-owned auto (HNOA) insurance: If a personal, leased, or rented vehicle used by your business is involved in an accident, umbrella liability coverage can extend your HNOA coverage to help pay for substantial claims.
• Employer's liability insurance: If an employee sues over a work injury or illness, umbrella insurance can increase your policy limits to cover legal costs that exceed your underlying employer's liability coverage. This policy is often included in workers' compensation insurance.

Extended liability coverage offers many benefits, especially for businesses that:

• Face higher liability risks, such as retail stores with substantial foot traffic.
• Need greater liability protection to get a contract with a particular client or sign a commercial lease.
• Operate in industries where a single claim, like a serious workplace injury or multi-vehicle accident, would likely exceed their standard policy limits.

The right type of extended coverage depends on which underlying policies a business needs to extend. Here are some examples of when a business might need umbrella coverage versus excess liability insurance:

Most businesses do not need both excess liability and umbrella liability policies. However, businesses with significant risk exposure in one area and risk across various others may find that one policy isn't enough. This may include:

• Commercial trucking companies: While umbrella liability would cover the substantial auto liability exposure across a fleet of vehicles and multiple drivers, they might also carry excess liability if a single loss event could exceed their underlying general liability coverage.
• Commercial builders: An umbrella policy would extend across their general liability, employer's liability, and auto insurance policies, but they may also carry excess liability over their general liability when a project owner requires coverage limits that umbrella can't meet on its own.
• Landscaping companies: Umbrella insurance would cover crew vehicles, customer property damage, and employee injuries, but a business operating in high-end residential or commercial properties may also carry excess over their general liability coverage in case a single damage or injury claim runs exceptionally high.