No matter what your insurance specialty may be, your clients probably ask you about their deductibles and maximum coverage limits on a regular basis. After all, they want to know how much they’ll have to pay if they file claims. If you have clients with histories of making frequent claims or have high levels of risk, you may want to consider offering them excess insurance.
Excess liability insurance is a secondary form of coverage that acts like a safety net for situations where your client’s expenses exceed the limits of their underlying insurance policy. Your clients choose how much excess they want to cover them, and their premiums go up accordingly.
This type of insurance is separate from their original policies. For example, if your client has excess homeowners insurance, they would be paying for two different homeowners insurance policies: their main homeowner’s insurance policy and their excess policy.
As such, there are a few points that you and your clients should discuss, which we will cover in this blog post.
Is Excess Liability Insurance Necessary?
Excess and surplus (E&S) insurance covers businesses or individuals with unique and uniquely high risks. This coverage is designed for those who pose a financial risk that’s too great and/or too rare for standard insurance.
It exists to provide clients with tailored coverage, as some may need excess coverage and some may not, depending on the risks and/or catastrophic losses they can reasonably foresee and plan for.
As such, excess liability insurance is not necessary for every client. It is also not legally mandated the way that, say, normal car insurance is. In order to determine if excess insurance is right for them, talk with your clients and look at factors such as their:
- Claims history
- Industry
- Job nature
- Savings accounts
- What risks their job/home/item carries
Excess and surplus lines insurance offers policyholders many benefits, but these will vary depending on the specific type of excess insurance that they purchase.
What Are the Different Types of Excess Insurance?
Excess and surplus insurance is customizable. It’s designed to fit neatly into a robust insurance plan and supplement existing coverage depending entirely on what each client needs.
Types of excess insurance may include:
- Umbrella excess insurance — Includes coverage for all of a client’s insurance plans.
- Lifestyle excess liability insurance — Includes coverage for plans related to your clients’ personal well-being. For example, if they have separate policies for their pets, expensive belongings, and houses, lifestyle insurance can cover excess charges across these plans.
- Excess liability insurance — This coverage is the more common counterpart to lifestyle excess liability insurance, and it applies to just one plan. Clients are more likely to find this variety helpful because it’s easier to keep track of and targets specific concerns.
- Excess property insurance — This policy includes coverage for property insurance.
When you’re offering excess liability insurance, it’s important to ensure that your clients know you’re not referring to umbrella insurance. While people often use these terms interchangeably, umbrella insurance covers all of a client’s different plans, while excess liability insurance generally covers costs for one or two related plans. Also, umbrella insurance assists with problems that the original insurance policies do not cover, while excess liability insurance does not.
As a broker, you must be a trusted resource for your clients when it comes to tailoring coverage. Knowing your clients’ needs, claims history, and risks will help you offer them the coverage they need most.
What Are Some Common Scenarios for This Insurance?
Excess and surplus lines insurance covers policyholders who have unique risks, extra high risks, and/or poor loss history. These candidates would generally be unable to obtain insurance through standard lines, meaning there’s a huge gap in coverage for them.
Examples of reasons that traditional licensed insurers might refuse coverage include the policyholder:
- Being a small/new business without a track record
- Having specific risks (such as roofers)
- Having high risks (such as general contractors)
- Being unique, unknown, or novel
Many clients find excess liability insurance difficult to understand at first, so it may be a good idea to offer them a few different scenarios where excess insurance can be useful in their particular situations.
For example, business owners are liable if customers get injured in their stores, whether they trip on cleaning equipment or slip on unmarked spills. Their general liability insurance kicks in to help with the customers’ medical bills, but sometimes customers need more money than a general liability policy covers. When this happens, excess insurance can be activated to cover the rest of the settlement.
Excess liability insurance can cover similar issues with commercial fleets, especially if a driver is liable for a major accident. It’s also useful if your clients’ small businesses get sued, as legal expenses usually far exceed their budgets.
What Are Some Common Scenarios for This Insurance?
Excess insurance is a specialty line that addresses your clients’ unique needs and risks. Its flexibility and customizable nature make it the perfect addition to standard coverage plans.
Those with unique insurance coverage needs must be made aware that there are insurance solutions out there for them. You are the key to bridging the gap between them. Cochrane & Company has always been about forming real relationships with all of our clients by listening to their needs and offering them tailored solutions. To learn more, contact us.
About Cochrane and Company
For more than six decades, Cochrane & Company has been proudly at the forefront of the insurance industry. Our experience has enabled us to innovate in powerful ways, reimagining the E&S market, and providing technology solutions that make it easy to do business with us. Licensed in all 50 states, we proudly serve clients across the nation, providing personalized and powerful solutions to help you become an even better partner for your clients. Speak to one of our experienced professionals today by calling (509) 462-1148.
