A Guide to Excess Liability Insurance Coverage
As a business owner, there are many risks that you face daily. In fact, 36% to 53% of small businesses have lawsuits filed against them each year for personal injury claims. These cases can cause a company hundreds, if not thousands, of dollars.
Sure, you probably already have a general liability policy or a commercial auto policy, but are those limits enough? What happens if someone wins a lawsuit against you that costs more than your policy limits?
That is where an excess liability insurance policy comes into play.
This additional coverage is there to protect you if your existing policy exceeds its limits. If you want to learn more about excess liability coverage and how it can benefit your business, you will want to keep on reading below. This brief guide will cover all you need to know about this necessary coverage and who you can reach out to for more information.
What Is Excess Liability Coverage?
Excess liability coverage, also known as excess liability insurance, is a policy that extends the limits of your existing insurance policy. This coverage does not expand your current insurance coverage over your business.
Instead, an excess policy serves as an extra layer of protection over your business if someone makes a claim against your company that exceeds your original policy’s limits. For example, let’s say your commercial liability policy only covers you for $30,000, and a customer gets hurt at your establishment.
The customer’s medical bills total $50,000, which is $20,000 over your commercial policy. If the claim is valid and your policy accepts liability, they will pay your policy limits of $30,000. Since there is a gap, your excess policy will pay for the rest.
Excess Liability vs. Umbrella
Excess liability and umbrella insurance policies sound similar, but they are not the same. Excess liability coverage provides extra coverage for one of your liability policies.
You can add an excess policy to your general liability coverage. Your excess policy only kicks in when your policy reaches its limit.
Commercial Umbrella Insurance
Umbrella policies provide extra coverage for several of your liability policies. Just like excess liability insurance, it only kicks in when your liability policy reaches its policy limits.
What Does Excess Liability Cover?
Since excess commercial liability adds additional coverage on top of your existing policy, much of your excess policy coverage depends on your original commercial policy. Excess coverage can increase the dollar limit on your primary policies, such as general liability or commercial auto insurance.
General Liability Coverage
General liability coverage encompasses your property and bodily injury liability coverages. You add additional coverage for any possible personal injury or property damage claims when you add excess liability coverage. This will also help cover any legal costs associated with disputing and negotiating these claims.
Commercial Auto Insurance
If you or one of your employees causes a catastrophic accident involving a lot of property damage and injuries, you will definitely want to make sure you’re covered. If your commercial auto policy pays out its limits, your excess policy will take care of the rest up to your excess policy’s limits.
Excess Liability Exclusions
As mentioned earlier, your excess liability policy coverage sits on top of your existing policy, and it carries the same terms and conditions.
This means that any exclusions listed on your commercial auto policy, or other liability policy you have the excess policy over, will apply to your excess liability coverage as well. For example, if your commercial auto liability coverage does not allow coverage for unauthorized drivers, your excess liability coverage will also exclude any liabilities caused by unauthorized drivers.
Who Needs Excess Liability Coverage?
Most small businesses buy excess liability to protect their business from catastrophic losses. If your business faces high liability risks, such as having substantial traffic, consider getting an excess liability policy. Other companies get excess liability coverage to work with specific clients as a requirement of their contract.
How Much Does Excess Liability Cost?
As with any type of insurance policy you buy, your premium costs depend on several factors.
Factors that affect the cost of your policy:
- Time in business
- Location of business
- Insurance provider
- What industry your business is in
- Amount of your underlying liability policy
- Limit of your excess policy
If you want a higher policy limit for your excess liability policy, you will typically pay a higher cost. Besides the limit you choose, the industry you work in plays a huge role in determining the cost of your policy.
For example, suppose you own a construction business, which poses a greater risk for liability claims. In that case, you may have a higher policy than a home-based accounting business or an interior designer.
As a general rule of thumb, you can expect to pay around $1,000 a year for a million-dollar excess policy. Of course, make sure that you consider the type of industry you work in.
Where to Get Excess Coverage
There are many insurance companies out there that offer this insurance coverage. When deciding where to buy your policy, make sure you research the company before signing any contracts.
You can reach out to companies like the McMahon Insurance Agency to get your excess policy. You will want to ensure that the insurance company you partner with has the proper licensing and expertise to hold and manage your policy properly.
Protect Your Business Today!
The last thing any business owner wants is for their business to go under because of a lawsuit they could not afford beyond their liability policy. To best protect your business, you will want to ensure that you have more than enough liability coverage to pay for any claims made against you.
If you are ready to buy excess liability coverage, contact us now.