What is the difference between excess liability and umbrella insurance?

Question

You need an umbrella policy if your total assets exceed your car or home insurance policy limits or if you have a high risk of being sued. An umbrella policy is an optional form of liability insurance designed to supplement existing coverage, and it typically costs $150 to $200 annually for $1 million in coverage. As a result, households with a high net worth are the most likely to need umbrella coverage.… read full answer

When You May Need an Umbrella Policy

Your assets are greater than your home or car insurance policy limits.

Your occupation puts you at high-risk for a lawsuit.

You own a trampoline, hot tub, or swimming pool.

You ski, hunt, surf, or participate in another hobby where you could injure someone else.

You own property, especially rental or investment properties.

You have a dog with a restricted breed or a bite history.

You are a public figure.

You own guns.

You frequently host guests.

A common rule of thumb is that households should have an umbrella policy if they have $1 million or more in assets. Umbrella policies are also a good investment for people whose assets will likely increase considerably in the future, as liability settlements can sometimes result in wage garnishment. For example, medical students are often advised to purchase umbrella coverage to protect their future income.

To purchase an umbrella policy, you will usually need a car insurance policy with high liability limits. For instance, Geico umbrella coverage requires at least $300,000 in bodily injury liability insurance and $100,000 in property damage liability coverage.

For more information, check out WalletHub’s complete guide to umbrella insurance.

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Answer 1 · 2021-11-22 12:07:24

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Leif Olson, Car Insurance Writer

@leif_olson_1 • 11/22/21 This answer was first published on 11/22/21. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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The difference between excess liability and umbrella insurance is that excess liability insurance only increases the limits of an underlying policy. In contrast, umbrella insurance broadens the scope of the existing coverage in addition to increasing its limits. Umbrella insurance can even protect you when you are sued for things like slander, libel, false arrest, and character defamation.

Differences Between Umbrella and Excess Liability Insurance

Category	Umbrella	Excess Liability
Does it extend the coverage limits of existing insurance?	Yes	Yes
Can it supplement coverage for multiple types of insurance?	Yes	No
Does it cover claims that underlying policies do not?	Yes	No
Does it require a minimum amount of existing coverage?	Yes	Yes

With an excess liability policy, anything not covered by your primary insurance policy is also not covered by excess liability. On the other hand, umbrella insurance will extend multiple existing policies while also covering some claims that aren’t already covered by a liability policy.

If you want to learn more, check out WalletHub’s guide to umbrella insurance.

What is the difference between excess liability and umbrella insurance?

Leif Olson, Car Insurance Writer

Differences Between Umbrella and Excess Liability Insurance

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