Excess Liability vs. Umbrella: What’s the Difference?
What Is the Basic Difference?
Both forms of coverage may sit above underlying liability policies, but the structure can differ. A follow-form excess policy generally tracks the underlying policy more closely, while an umbrella may have its own terms and may provide broader protection in some situations.
Usually Follows the Underlying Coverage
Follow-form excess liability is generally designed to provide additional limits above specified underlying policies while following much of their coverage structure.
May Have Broader or Different Terms
A commercial umbrella may also provide higher liability limits, but it can have its own definitions, exclusions, conditions, and coverage provisions.
The Policies Underneath Still Matter
Excess and umbrella policies generally require the contractor to maintain specified underlying insurance with minimum limits.
General Liability
Contractor general liability is commonly one of the underlying policies that may be scheduled beneath an excess or umbrella policy.
Commercial Auto
Commercial auto liability may also be included when the contractor wants higher limits for qualifying vehicle-related liability exposures.
Employers Liability
Depending on the program, the employers liability portion of workers’ compensation may also be considered as an underlying exposure.
Required Minimum Limits
The excess or umbrella policy may require certain minimum underlying limits to remain in place throughout the policy period.
What Should Contractors Look at Beyond the Limit?
Two policies may both provide an additional $1 million or more in liability limits but still respond differently because of their wording, underlying requirements, and exclusions.
Follow-Form Language
Review whether the excess coverage follows the underlying policy and where its wording differs.
Umbrella Exclusions
An umbrella can have its own exclusions even when the underlying policy provides coverage for a particular exposure.
Underlying Schedule
Confirm which general liability, auto, employers liability, or other policies are recognized as underlying insurance.
Contract Requirements
Review whether project contracts require a specific excess or umbrella limit and whether other insurance conditions also apply.
Need Higher Liability Limits for Your Contracting Business?
Best Formula Insurance can help contractors compare excess liability and commercial umbrella options, underlying-policy requirements, available limits, contract requirements, and other liability considerations.