Excess insurance

Excess insurance is a type of liability insurance that provides coverage for losses exceeding the limits of an underlying primary insurance policy. Unlike primary insurance, which responds first to a claim up to its specified limit, excess insurance activates only after the primary coverage is exhausted, offering an additional layer of financial protection against large or catastrophic losses. For example, if a primary auto insurance policy has a liability limit of $100,000 and a claim amounts to $150,000, an excess policy with a $50,000 limit would cover the remaining $50,000 after the primary policy pays out.

Commonly used in both personal and commercial contexts, excess insurance is distinct from umbrella insurance, though the terms are sometimes confused in casual usage. In British English, "excess" also refers to a deductible—the amount a policyholder pays out-of-pocket before insurance kicks in—but here it denotes additional coverage layers.

Types of excess insurance

Excess insurance can take several forms, depending on its structure and purpose:

• Stand-Alone Excess Policies: These have their own terms, conditions, and exclusions, independent of the primary policy. They are tailored to specific risks or higher limits.
• Follow-Form Excess Policies: These mirror the terms and coverage of the underlying primary policy, only extending the financial limit. They are common in commercial insurance.
• Excess Liability Insurance: Focused on liability claims, this type protects against large judgments or settlements beyond primary coverage.

Excess insurance differs from umbrella insurance. While both provide coverage above primary limits, umbrella policies often broaden the scope of coverage (e.g., including risks not covered by the primary policy), whereas excess insurance typically adheres to the primary policy’s scope, only increasing the monetary ceiling.

See also

• Umbrella insurance
• Deductible
• Liability insurance
• Risk management