Do I Need Excess Liability or Umbrella Liability?

January 11, 2022

Business people negotiating a contract. Human hands working with documents at desk and signing excess liability contract.

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Which coverage do I need – Excess Liability or Umbrella Liability? Both? Neither?

Your construction company has all the necessary insurance coverage it needs, or does it? Why would you need either an excess liability policy and/or an umbrella liability policy? First, let’s examine what each of these policies covers and then why it might make sense for your company to examine either one.

What is Excess Liability?

Excess Liability is an insurance policy that provides higher limits to your primary or underlying policy, such as General Liability or Errors and Omissions insurance. It will most likely have the same coverage, terms, and exclusions as your underlying policy. The sole purpose of Excess Liability is to provide additional limits to the underlying insurance. It will only trigger when that insurance policy reaches its limit responding to an occurrence.


What is Umbrella Liability?

Umbrella Liability is a policy designed to protect the insured from potential “big” losses. Umbrella coverage is a type of Excess Liability. This coverage picks up where the underlying liability insurance policies end. The main purposes of an Umbrella policy are to:

  • Provide additional limits to the insured once their underlying policy’s limits have been exhausted by claim payments on an occurrence.
  • Drop-down and pick-up where the underlying policy’s aggregate limit is exhausted by claim payments.
  • Provide protection against additional claims that are not covered by the primary policy.

Umbrella policies provide increased limits over underlying insurance and can drop-down and provide coverage, should none be available in the primary policy. Alternately, excess policies only provide coverage when the underlying policy responds to an occurrence. 

So, when does it make sense to investigate either of these policies for your construction company? You should speak to your Broker about these policies if you are unsure if the primary policy’s limits will adequately cover your company’s current exposure. Another reason is if the contract for a new job demands limits that exceed your primary liability policies.

Make an appointment with your Insurance Broker to review your current coverage and determine if either of these policies is appropriate for your business. If you have any additional questions, reach out to TSIB and speak with one of our Risk Consultants to ensure your contracts have the proper indemnification and insurance articles.

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TSIB’s Risk Consultants are currently servicing the following locations:

East Coast: New York City, NY; Bergen County, NJ; Fairfield County, CT; Philadelphia, PA

Texas: Austin, San Antonio, Houston, Dallas

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Topics: Construction Commercial Insurance

Written by The TSIB Team

All Authors and TSIB