Umbrella and excess liability policies provide additional limits above underlying primary policies (general liability, auto liability, employers' liability). An umbrella policy may also provide broader coverage than the underlying policies (drop-down coverage), while a true excess policy follows the exact terms of the underlying policy. For businesses and UHNW individuals, umbrella coverage is often the most critical policy in the program — it protects against the catastrophic claim that exceeds primary limits.
Every mid-market business and high-net-worth individual needs umbrella or excess liability coverage. The rise of 'nuclear verdicts' — jury awards exceeding $10M — makes adequate excess limits essential. Companies in construction, transportation, healthcare, and hospitality face the highest excess liability exposure. UHNW individuals need personal umbrella coverage to protect assets from personal liability claims.
Umbrella policies sit above primary GL, auto, and employers' liability policies and increase when primary limits are exhausted. They are triggered when a claim exceeds underlying limits. True umbrella policies may also provide coverage for claims not covered by underlying policies (subject to a self-insured retention). Excess policies stack above primary or lower excess layers in towers for large risks requiring $50M+ in total limits.
Umbrella/excess limits range from $1M to $25M per policy, with total towers (multiple excess layers) reaching $100M+ for large risks. Self-insured retentions on umbrella policies typically range from $10K to $25K for drop-down coverage. Premium varies significantly by industry and underlying exposure, ranging from $3K-$5K per million for low-hazard risks to $15K-$25K per million for construction and transportation.
A construction company's employee was seriously injured on a jobsite, resulting in a $7.5M verdict. The general liability policy paid its $1M limit, and the umbrella policy covered the remaining $6.5M — preventing what would have been a potentially business-ending judgment against the company.