What's the Difference Between Excess and Umbrella Insurance?

Excess and umbrella liability insurance have some important differences, most notably that the former simply provides additional limits to an underlying policy, while the latter also expands coverage to include claims and losses outside its initial scope.


Published August 20, 2018   •   1 minute read

Though you may sometimes hear Excess and Umbrella liability insurance used synonymously, since both increase the limits of underlying policies, there are several significant distinctions.

Firstly, what's an Underlying Policy?

An underlying policy is the initial insurance coverage established to protect against particular risks and address associated loss.

Excess Insurance

Excess insurance provides additional limits above those covered by the underlying policy.

Unlike umbrella policies, excess insurance does not expand the terms of the underlying policy, but rather, bestows higher limits to safeguard against unforeseen, catastrophic claims and loss.

Umbrella Insurance

A form of excess liability insurance, umbrella policies cover claims exceeding the limits stipulated by the underlying policy's terms, while also providing broader coverage encompassing losses outside of those outlined within the initial policy.

The typical example is that an umbrella policy may cover auto liability in a foreign country even though the commercial auto policy does not extend it’s territory to foreign countries.

Umbrella insurance thus helps close any outstanding liability gaps.

Another term you'll likely hear regarding liability insurance is Self-Insured Retention, commonly referred to as SIR.

What is Self-Insured Retention? This is a specific amount the insured must pay to a claimant before the liability insurance policy will address any losses.

Key Takeaways

  • Excess insurance does not affect the terms of your underlying policy, but instead provides additional limits.
  • Umbrella insurance is a broader type of excess insurance that can additionally cover situations outside the scope of the underlying policy.

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