Why is Excess Insurance so Critical?

excess insurance

When you purchase insurance, you usually assume that you will be covered in the case of an unexpected loss. However, insurance policies have limits, and there are instances when your loss exceeds those limits. Excess insurance, also called a secondary policy or umbrella policy, extends the limit of a primary insurance policy. When the underlying insurance policy, such as auto or homeowners, has reached its limit, the excess policy kicks in. This is very useful in a lawsuit situation where you stand to lose a greater amount than your insurance will pay; an excess policy would keep you from losing your savings or even declaring bankruptcy. Let’s take a closer look at excess insurance.

What Does Excess Insurance Cover?

Excess insurance policies are essentially insurance policies for your insurance policies. They can increase the amount of coverage for the following situations:

  • Additional protection for auto insurance policies, covering property damage or bodily injury claims and legal fees that occur as a result of a car accident.
  • Additional protection for general liability insurance, covering bodily injury cases, like slip and falls, property damage, and associated legal costs.
  • Additional protection for employer’s liability insurance or workers’ compensation insurance, covering lawsuits by employees for illnesses or injuries that are not covered by workers’ comp.
  • Other liabilities beyond the primary policy 

What is Not Covered?

Excess liability policies will not expand current coverage, but provides a larger dollar limit to protect you if there is a claim above your existing policy limits. Excess liability policies are not appropriate for the following:

  • Additional enhancements to coverage: anything that is not covered by the primary policy will not be covered by excess liability insurance.
  • First line of defense: excess policy cannot be the primary policy, but is always used to supplement existing policies.
  • Multiple policies: excess coverage can only apply to a single policy. If an excess liability policy is added to the general liability policy, the excess insurance can only increase the limit on that one policy. The need for additional funds on any other policies would need their own excess policy to cover those limits.

Do You Need Excess Insurance?

There are many risk factors that play a role in determining whether you would benefit from excess liability coverage. If any of the following factors apply, then you may have a higher-than-average liability risk, and this coverage may be worth considering:

  • Home ownership
  • Boat ownership
  • Dog ownership
  • Swimming pool ownership
  • Employment of domestic staff, including housekeeper, gardener, or nanny
  • Frequent social media posting
  • Serve on organizational board

The insurance coverage you need depends on your liability risk factors, financial situation, and existing insurance policies. Therefore, taking stock of your current situation and talking with an insurance professional is advisable to ensure you never find yourself in a situation where your insurance policy is not enough to cover your losses.

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.


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