Excess liability insurance serves as insurance on your insurance. If your primary insurance plan doesn't cover the full cost of liability, the excess liability insurance kicks in to cover the remainder. If you have low limits on your primary insurance or if you are in a profession where the cost of liability can be very high, excess liability insurance may be a smart choice.
Liability Insurance Basics
Liability insurance protects you if you are sued. Lawsuits can be costly, and you may have to pay not only for the other party's injuries or property damage, but also for her attorney's fees. Liability insurance companies typically provide policy holders with legal counsel when they are sued and cover the cost of the lawsuit after the deductible has been paid. However, liability insurance packages have limits, and if you are sued for a large sum of money, you may be stuck paying the excess cost out of your own pocket.
Excess Liability Insurance
Unlike home, auto or malpractice insurance, excess liability insurance is umbrella insurance. Insurance companies usually offer excess liability coverage as either personal umbrella coverage or business umbrella coverage. Rather than insuring one specific thing, excess liability can kick in and cover additional liability costs that any other form of insurance doesn't cover. Your policy may still have limits, and your insurance company will have to evaluate your risk. Because the policy is an umbrella policy, the company may evaluate your risks in a variety of areas of life. Some costs may not be covered, or your insurance company may establish guidelines you must meet to be eligible for coverage. For example, if you have a history of speeding, the insurance company might decide not to cover auto liability if you're in an accident and are speeding.
Examples of Coverage
Your excess liability coverage kicks in only after your primary policy's limit has been exceeded.The excess liability company often works directly with your primary insurance company; sometimes, however, the excess liability company takes over after your limits are exceeded. For example, if you are a lawyer sued for malpractice, your malpractice insurance may cover you up to $100,000. If the person suing you is requesting $1 million, your two insurance companies may work together, and the excess liability company might pay a significant portion of the amount in excess of $100,000.
Excess liability coverage is an additional expense and is not for everyone. If you have few assets, you don't have much to protect and may not need this coverage. Conversely, if you have much to lose in a lawsuit, you might want to consider the additional coverage. People working in professions with lots of litigation as well as people who live in homes with a high risk of damage can also benefit from the additional insurance.
Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.