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Excessive policy or umbrella policy? What is the difference and which is better?

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One of the questions that a commercial line insurer hears the most is: "Is your umbrella subsequent?" Basically, it will only increase the limits of my current coverage (follow-up form), or will it also offer additional coverage (umbrella)? Of course, the answer varies depending on the carrier and shape used. But why does it matter? What is the real difference between an umbrella policy and an exaggerated (or "consequential") policy?

To answer how they are different, let's start with how they are similar. Both usually contain one per event and a total limit (often the same), and the limits for both usually start at $ 1,000,000 and increase by $ 1,000,000 steps. Both forms usually contain a scheme for underlying insurances (so-called primary insurances). The limits for both an umbrella and a surplus policy apply after primary limits have been used up. For example, an employee driving a company vehicle hits a building and causes property damage. If the amount of damages exceeds the liability limit for your commercial car policy, then an umbrella or surplus policy would come into play.

The two forms of policy are similar enough that people (including those in the industry) often use the terms umbrella and surplus interchangeably. But there are some big differences.

A surplus policy does not offer coverage that is not included in the underlying policy. A policy (such as a commercial car) must be planned for the surplus policy to be able to respond to a requirement. and that claim must have been covered by the terms of the underlying policy.

An umbrella policy can do the same – but it also has clear conditions that can respond to claims that are not covered by the underlying policy. When this happens, a self-insured retention (SIR) applies (a typical SIR is $ 10,000). The insurance would respond after the insured has spent SIR. The policy can respond either when a primary policy is not scheduled or when coverage is not available.

Returning to our example, let's assume that our commercial car policy had a liability limit of $ 500,000 and property damage was worth $ 750,000. The commercial car policy covered the claim and paid the insurance limit. In this case, both a surplus and an umbrella policy with a limit of $ 1,000,000 would offer coverage for an additional $ 250,000 in liability.

Let us assume that the claim was not covered. Perhaps the commercial car policy only covers liability for scheduled vehicles and the insured forgot to report that a new car was added. Or maybe the driver is excluded from the policy. In both cases, the surplus would not respond because there was no coverage for the underlying. However, the umbrella may have some coverage available, provided that the insured pays SIR.

Page note: An SIR is also different from a deductible. An SIR is money that the insured must have spent before the carrier handles damages. The carrier has no involvement in defense, investigation, anything until SIR is satisfied. Most umbrella policies have an SIR of at least $ 10,000. Even if excess insurance policies do not have an SIR, they can have a deductible. The difference is that the carrier is still investigating and defending the claim from the first dollar; the insured is responsible for the deductible part of any payments.

Which is better then? Over-the-counter insurance is often cheaper because the coverage is more defined. Excess insurance does not require SIR either, which is an out-of-pocket cost that some insureds cannot handle. Umbrella policies can offer an extra layer of coverage, but can do so at unnecessary cost, especially for a company that has the right underlying coverage in place.

It's always a good idea to talk to your agent about what makes the most sense. for your company! I also wanted to share the informative Commercial Umbrella video.

The information above is of a general nature and your insurance and coverage may differ from the examples. Read your insurance in its entirety to determine your available coverage.

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