What is the difference between a commercial excess policy and a commercial umbrella liability policy which one is better how are they different and how are they similar?
There are two coverage forms:
- Commercial Umbrella Liability Insurance
- Commercial Excess Insurance
Let’s understand each of them one by one starting with umbrella liability insurance.
What Is Commercial Umbrella Liability Insurance?
Let’s talk about the first one, what is commercial umbrella liability insurance? commercial umbrella insurance is a policy form that provides increased limits of liability protection over and above a schedule of underlying insurance policies.
It can provide broader protection than what’s covered in those underlying policies. An umbrella policy is designed to pick up protection where the underlying liability policies leave off as well as fill in some gaps and limitations of those underlying policies.
What is Commercial Excess Insurance?
A commercial excess insurance policy also provides increased limits of liability protection over one or more underlying policy forms in most cases the excess policies will fall follow the underlying policy form.
If it’s not covered in the underlying policy it’s not going to be covered in the excess policy further the excess policy is generally not as broad as an umbrella policy.
What Is Underlying Insurance?
An underlying Insurance is a type of actual policy that is described in the umbrella or the excess policy known as the schedule of the underlying insurance.
For example for a small business owner may have a Business Owner’s Policy (BOP) that includes general liability and not owned and hired auto liability, plus they have a worker’s compensation policy which also includes something called employers liability.
The schedule of underlying Insurance in this business owner’s case will note the general liability insurance the non-owned auto liability and the employer’s liability with their policy numbers and their policy dates in the schedule of underlying Insurance. A critical element of both the umbrella and excess policies is that if the underlying Insurance schedule omits a policy that should be on the schedule there’s going to be a problem.
Difference Between Commercial Excess Insurance And Commercial Umbrella Liability Insurance
Commercial access insurance provides additional limits to an underlying policy or policies while a commercial umbrella liability insurance policy can expand coverage to include claims and losses outside the scope of those underlying policies.
So which one is better an excess policy or a commercial umbrella liability insurance policy? In simple term for business owners an umbrella policy will be a better choice but sometimes commercial excess insurance policy is the only coverage that is available to provide additional limits of protection.
In fact a business may have both an excess and an umbrella policy in its coverage portfolio this happens when standard coverages such as general liability Auto liability and employee liability exist and an umbrella policy is written over them.
Let’s say they also have management and professional Insurance known as DNO and E&O and the business needs higher limits over those non-standard types of policy forms and an excess liability policy is written over them.
How Does An Umbrella or Excess Insurance Policy Work?
As mentioned both policies commercial umbrella liability insurance policy and excess insurance policy have their basic sense provide an extra layer or limit of protection over the policies. Found in the underlying policy schedule.
Let’s understand this with an example to illustrate this if your company had a customer slip and fall inside your store or your office or on your premises and they badly injured themselves and they sue you for tens of lakhs or half crore rupees and one your general liability policy would pay out first on that claim and say that policy had a limit of a 20 lakh rupees then that policy is exhausted then the umbrella or excess policy would kick in and pay the rest amount against the lawsuit.
Who Needs Excess Or Umbrella Insurance Policy?
An Excess or commercial umbrella liability protection should be a part of all businesses, and owners should consider purchasing excess or commercial umbrella liability protection. It’s typically very affordable and provides, what is called as Sleep Insurance knowing that you have got extra protection helps you sleep at night.
The other thing is that many agents will often only quote a 50 lac rupees limit on an umbrella policy if you have a lot to lose in a lawsuit you should be looking at higher limits of protection, in fact on your renewals you should be asking to see options for various prices depending on the size of your business.
Mistakes To Avoid While Buying Excess And Commercial Umbrella Liability Insurance
Common mistakes when it comes to the umbrella and excess policies, there are several mistakes that can be seen while auditing insurance plans when it comes to these policies the first is when it comes to autos and a couple of things can happen here.
When a business elects to insure their Autos with a different insurance company than the one that covers their other policies because it’s cheaper. It is common for the insurer providing the business owners workers comp and umbrella to not include the auto in the underlying schedule of policies.
Since the primary insurer doesn’t control the auto policy they don’t know if the minimum required limits of liability exist or who the drivers are so they often refuse to provide umbrella protection over the auto liability exposure.
And this is a big problem as auto exposure is usually where big liability claims happen the second situation and this is a mistake made by insurance agents is that the business policies include general liability and non-owned and hired.
Auto liability and employers liability and they write an umbrella liability insurance policy over those coverages and that’s fine except the business owner has a private vehicle leased by and registers the business.
But it is insured on that executive’s personal auto policy since it’s an owned Auto it’s not covered by the non-owned. Coverage extension in the business owner’s policy and therefore not covered by the commercial umbrella liability insurance policy.
Little technical but this is where a lot of mistakes happen and they are some dangerous mistakes finally we commonly see certain coverages not included in the underlying schedule of policies that should be included this is just bad behavior by agents and brokers. It really shouldn’t happen here’s the bottom line excess or umbrella liability insurance policies are both similar but they’re also very different and structuring Extra Protection over underlying policies is critically important.
