Excess Insurance

Imagine you have an insurance policy that covers USD 60,000 of property damage. However, the overall costs of repair have exceeded that amount by USD 10,000. That means you have an extra charge on your insurance claim amount. Hence, you have to pay from your pocket instead of relying on the insurance company. 

Yes, an unfortunate chain of events can compromise the financial security that you have, even with insurance plans. That is where an excess liability insurance plan comes in. 

This type of coverage policy will protect your financial standing against surplus charges. You never know how much it can cost you to repair or replace expensive assets like your car. Therefore, these secondary policies will assist you with the extra charge you may have incurred. 

Read on to learn about insurance plans, its benefits, and more. 

Definition of Excess Liability Insurance Plans

According to Cochrane & Company, this type of insurance is a secondary coverage plan. It offers assistance when the insurance holder exceeds the expenses in their normal insurance. These plans offer a financial safety net when you have reached the maximum coverage limits. Usually, they extend the limit of primary or underlying liability claims. 

You should choose an excess insurance plan if your assets have higher risk levels. Moreover, the insurance holder can select the amount they want to cover as excess. As a result, your premiums will change based on the extra coverage. 

The Difference Between Excess and Umbrella Insurance Policies 

Cochrane & Company states that you may confuse excess liability with umbrella insurance plans. Sometimes, people may use both terms interchangeably but refer to the same policy. However, both of them have different coverage policies. 

For example, umbrella insurance covers problems that the original policy does not. They assist with several primary liability policies and are not limited to the policyholder. On the other hand, excess liability insurance provides coverage for the extra cost of a few related plans.

Types of Excess Insurance Policies 

You can either opt for a voluntary excess or a compulsory excess policy. Either way, the two types of excess liability coverage are as follows: 

  • Lifestyle excess liability: It relates to your personal well-being. This covers plans related to policies for expensive belongings, houses, pets, and more. Therefore, it covers excess charges incurred by these assets. 
  • Single excess liability: Ideally, this is a common policy that only applies to one plan. You can keep track of it as the plan will target specific assets. 

You might find the types of liability insurance policies difficult to understand because of their complex offerings. However, it is straightforward. 

For example, you will be liable for compensation if your employees get injured on the job. Your general liability insurance policy will help cover their medical bills. But it can sometimes exceed your claims. That is where excess insurance comes into play and covers legal, medical, and commercial expenses. 

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Who Needs Excess Insurance?

Excess insurance can be availed by companies and for personal coverage. It can protect you or a business from financial loss. Therefore, both business owners and common people can take advantage of this policy if: 

  • They own a home, regularly drive a car, and have a pet 
  • Their business premises has a high foot traffic 
  • They employ a housekeeper, gardener, nanny, or caregiver
  • Their company handles hazardous or high-risk assets 
  • They own a boat or expensive items 

Do you relate to any of these lifestyles or own a risky business? Then, you should get an excess liability policy. However, this insurance is not a legal mandate and neither a necessity. Try talking to your insurance providers to analyze your claim history and savings to determine if you require the policy. 

The Benefits of Getting an Excess Liability Insurance 

Excess liability coverage can make your premiums cheaper if you do not make claims. Hence, your insurer will offer you an increased voluntary excess for the cheaper premiums. This will only be possible if you do not have a history of making claims and have a good credit score. But it leaves you with the ability to get financially covered during unforeseen circumstances. 

Of course, this insurance policy offers you protection for bigger funds. It ensures that you have access to insurer money for higher claims. As a result, it will safeguard major business assets without draining your finances. 

The Bottom Line

An excess insurance policy is a safety net for unprecedented accidents that might have exceeded your usual claim amount. It acts as a secondary insurance plan that covers any extra claim on the amount already promised by the insurers. 

However, you might confuse excess liability with umbrella liability policies. While the latter covers excess costs on all your claims, the former safeguards specific assets. 

Ideally, excess insurance comes in two types, namely, lifestyle and single excess liability insurance policies. It is not a legal mandate or necessity for companies and people to take up these policies. However, expensive homeowners and commercial buildings with high foot traffic should invest in one. 

That way, you can engage in all the benefits this policy has to offer.

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