Insurance glossary · How policies work
umbrella vs excess liability.
Both add limits above your liability, auto and employer’s liability policies. An excess policy follows the rules of the policies below it; an umbrella can also fill some gaps they leave.
What does an umbrella policy sit on top of?
Usually your general liability, commercial auto and employer’s liability policies. When a covered claim uses up the limit of one of those, the umbrella pays above it, up to its own limit.
What’s the real difference between umbrella and excess?
An excess policy follows the terms of the policy beneath it and only adds limit. An umbrella can be broader, covering some claims the underlying policies don’t, after a self-insured retention. In practice many policies blend the two, so the wording matters more than the name.
What does follow form mean?
It means the excess policy adopts the coverage terms of the policy below it, so if the underlying policy covers a claim, the excess does too above the limit. Many follow-form policies still add some exclusions of their own.
What happens when an underlying aggregate is used up?
Many umbrellas drop down to take the place of an exhausted underlying aggregate, so coverage continues. Whether yours does, and from what point, depends on its wording.
Why do contracts require an umbrella?
To get higher total limits without asking for a very large primary policy, and to protect additional insureds whose claims share your limits. Contracts often require the umbrella to follow the same additional insured, primary and waiver terms as the general liability.
Does an umbrella cover additional insureds?
Only if its wording extends to them, often by following the underlying policy’s additional insured terms or requiring a written contract. Contracts commonly ask for this specifically.
Can I stack several excess policies?
Yes. Larger limits are often built in layers, with each excess policy sitting above the one below, and each layer pays only after the ones beneath it are used up.
Does an umbrella work differently by state?
Mostly the policy controls, but some states regulate umbrellas. New York defines what a commercial umbrella must cover and sets a minimum retention, and North Carolina requires underinsured motorist coverage to be offered on umbrellas that include auto. The notes below cover Riza’s licensed states.
in the states where Riza is licensed.
Riza is a licensed insurance agency in New York, Colorado, Texas, Florida, Massachusetts, Arizona, Nevada, North Carolina, New Jersey and Georgia. Notes below cite the law they come from. Detailed write-ups cover Arizona, Nevada, Texas, North Carolina and New York. One-line notes for other licensed states appear with them when this term has one.
- ArizonaArizona doesn’t require insurers to offer uninsured or underinsured motorist coverage on general liability, excess or umbrella policies that don’t insure a specific vehicle. No other Arizona rule distinguishes umbrella from excess.A.R.S. § 20-259.01contractors in Arizona →
- NevadaNevada likewise exempts general liability, excess and umbrella policies from offering uninsured motorist coverage, and its statute defines both terms: excess covers loss above a stated amount, and an umbrella covers losses above what other policies are required to cover.NRS ch. 687B (687B.145)contractors in Nevada →
- TexasA Texas appeals court has held an umbrella isn’t an auto policy for uninsured motorist purposes, so it doesn’t have to include that coverage. Umbrella forms reviewed by the state must make an unlimited tail available if they’re claims-made.Sidelnik v. American States Ins. Co. (Tex. App. 1996) · TDI, review checklist: commercial umbrellacontractors in Texas →
- North CarolinaNorth Carolina is the exception: its courts have required underinsured motorist coverage to be offered on umbrella coverage that provides auto liability, so umbrella insurers there need an offer or a written rejection.Isenhour v. Universal Underwriters Ins. Co. (N.C. 1996) · Piazza v. Little (N.C. App. 1998)contractors in North Carolina →
- New YorkNew York defines a commercial umbrella as sitting over both general liability and auto liability, with minimum underlying limits, and requires a minimum self-insured retention where the umbrella covers losses the underlying policies don’t. The state has said a commercial umbrella can’t exclude auto liability.11 NYCRR § 161.1 · NY DFS OGC Opinion 04-02-20contractors in New York →
by trade.
- General contractorsOwner contracts commonly set umbrella minimums and require it to follow additional insured, primary and waiver terms.
- RoofingRoofing contracts often require higher umbrella limits than other trades.
- ElectricalCommercial electrical subcontracts often list umbrella limits along with general liability and auto.
where you’ll see it.
- Contracts“Umbrella or excess liability of not less than … per occurrence, following form.”
- Umbrella declarationsA schedule of underlying insurance that has to stay in force.
- CertificatesAn “umbrella liability” line with “occur” or “claims-made” and the limits.
the layers should line up.
Riza matches your umbrella to the policies beneath it and to your contracts, so additional insured, primary and waiver terms carry up, and no gap opens between the layers.
Get a quoterelated terms.
Coverage it touches: Umbrella and excess · Excess liability