Commercial Insurance 101: What Is The Difference Between Umbrella Insurance & Excess Liability?

How's it going everybody? Today I wanted to discuss a common question that I get from businesses and that is what is the difference between umbrella insurance and excess liability insurance? Thank you for stopping by. My name is Brian Gutowski. I'm an independent insurance agent based here in the state of Michigan, Metro Detroit specifically, and I work with businesses on their commercial insurance programs as well as helping families and individuals with their personal insurance, their home, their auto insurance as well. My goal with this channel is to pass on a little bit of educational information to you so that you can make more informed decisions around your insurance, whether that's for yourself, your business, or your family, and overall help answer any questions that you might have. So let's get into it. First, umbrella insurance. Think of this as a safety net that sits over all of your regular liability policies. It kicks in when the limits on your underlying policies, like general liability or commercial auto, have been maxed out in the event of a claim. For businesses, this is crucial because high-cost claims can pop up and having umbrella coverage means you will be much less likely to be caught off guard financially by these high-cost claims. Now, excess liability insurance is a bit different. It also provides additional coverage, but it strictly provides that additional coverage to the policy it's attached to. It is essentially adding to the limit of the policy that it sits over. If you're concerned about a particular area of risk for your business, such as general liability or maybe product liability specifically, an excess liability policy can be a good way to boost that coverage in that specific area. But an important thing to note is that excess liability can actually sit over an umbrella policy, and this is actually how a lot of commercial insurance programs are structured. The umbrella adds that broad layer of coverage over your initial policies, and then the excess liability policy is there to increase the limits even further. So why is excess liability often necessary? Many insurance companies will offer a maximum umbrella limit that could be $5 million, $10 million, or $15 million, depending on the type of risk that your business falls under. And then if your business does want more coverage or need more coverage for any particular reason, whether it's just general peace of mind or for a specific contract requirement that you have for a client, customer, or business partner, this is when an excess liability policy would come into play and how you would get that additional coverage. This can be especially important in high-risk industries like construction, healthcare, or maybe if you have a large real estate portfolio where higher limits might be necessary due to the nature of the work and the risk and exposure that your business has. And when it comes to claims, these policies work in layers. The primary policy will pay first, such as the general liability or commercial auto, and then the umbrella, and then if needed, the excess liability would step in to cover any remaining costs. So when exactly would you need each policy? Umbrella insurance is great for businesses that have multiple liability exposures, such as general liability or commercial auto that I've mentioned previously. Again, it gives you that broad layer of protection across multiple areas, and then excess liability is more focused and is ideal if you want to increase coverage in a specific area or just increase your overall limits in general and add to your umbrella policy an overall maximum coverage limit. Both types of policies are very important because they protect your business from those large, unexpected claims that could potentially be financially devastating. Choosing how to implement the two depends on your business-specific needs and the overall risk management strategy that your business wants to take. So thank you for watching, and if you are looking for help with your commercial insurance program, I would love the opportunity to work with you and see if our team can help. There are a lot of ways to get a hold of me, and they should all be in the description below. Please feel free to reach out on social media, whatever is easiest, and if you have any questions about insurance, whether it's commercial or personal, please feel free to leave them in the comments below. I would love to help answer those as well. So thank you again.