You’ve poured blood, sweat and tears into your business. So the last thing you want is for some kind of fluke accident to wipe you out.
That’s where excess liability insurance comes in. It offers higher limits of financial protection so you can sleep better at night knowing you’re covered.
But what exactly is excess liability insurance and how does it work?
Let’s dig in!
What Is Excess Liability Coverage?
Excess liability coverage is a type of business insurance that protects you from unexpected business-busting events that are too much for your standard insurance to handle alone. Think of it as an extra (“excess”) layer of liability coverage. You add it to your business's existing policies and it raises your general liability coverage so your insurer will cover more. Excess liability coverage is also sometimes added to an umbrella insurance policy.
It goes by a bunch of different names—excess liability coverage, excess liability insurance and commercial excess liability insurance. But just like soda versus pop, or tennis shoes versus sneakers, these are all the same thing, folks.
How Does Excess Liability Work?
An excess liability coverage policy only has one job: to increase the dollar limit of your liability coverage. It doesn’t cover anything other than what’s already covered in your existing policy. It’s kind of like adding a credit limit increase to your credit cards. (Yes, we still hate credit cards—this is just a comparison!) It doesn’t change what you can use the card for, but it does give you a higher limit. (P.S. Don’t use credit cards—ever.)
You’ve worked hard to get to where you are. But don’t leave yourself vulnerable.
So let’s say your business general liability policy covers claims up to a limit of $1 million. Your excess liability coverage could increase that to $3 million. So if you end up having to settle a large lawsuit for $2 million, your initial policy would cover the first $1 million and the excess policy would cover the remaining $1 million.
Umbrella vs. Excess Liability Insurance
Sometimes people mix-up the terms umbrella and excess liability insurance. But don’t be confused. These aren’t the same thing. (We know this can get pretty technical but stay with us.)
First, umbrella insurance is broader than excess liability insurance. Umbrella can be added to many different types of liability policies (like homeowners or auto insurance). And umbrella can cover claims that fall outside other policies, like covering a loss that isn’t typically covered by your homeowners insurance.
Second, with excess liability insurance, you won’t have to pay a deductible before it kicks in. This is because you would have already hit your deductible with your existing liability policy. With an umbrella policy for your business, you typically have to pay a self-insured retention (SIR) deductible before your insurer will start ponying up their share.
These differences are one reason it’s wise to work with an independent insurance agent who can make sure you’re getting the right policy for your business needs.
What Does Excess Liability Insurance Cover?
Your excess liability insurance covers whatever the policy underneath it covers. Here are just a few things that could include, depending on the way your policies are set up:
- General liability insurance covers things like bodily injury, property damage, and legal and medical expenses. So if someone slips on your stairs walking up to your store, breaks a bone and sues you, general liability swoops in to help with those costs. And with an excess liability policy on top of it, you’ll have even more financial coverage.
- Commercial auto insurance covers any vehicles you use to run your business.
- Employer’s liability insurance is usually part of your workers’ compensation package. It gives you extra protection from lawsuits or claims if one of your workers gets injured on the job.
Do You Need Excess Liability Insurance?
So, do you actually need to worry about excess liability insurance? It depends.
While all business owners need some level of general liability insurance, not everyone needs excess liability. It’s based on your business’s size and how vulnerable you are. Look at your overall picture, which industry you’re in, your day-to-day operations and your level of risk. For example, if you run a large construction company, you have much more risk than if you’re selling hats online from your home.
How Much Does Excess Liability Insurance Cost?
It’s hard to estimate exactly how much excess liability insurance costs because there are a lot of factors. But the price of excess liability insurance is generally based on things like:
- What kind of business you own
- Your location
- Number of employees
- How long you’ve been in business
- Your history of filing claims
- The limit amount you choose
- Types of threats your business is exposed to
That said, you can expect to pay more if you’re increasing your liability limit by a lot. Again, since insurance is based on level of risk, if you own a construction company, you should expect to pay more for your policy since you’re at a higher risk of filing a claim.
Some Tips to Reduce Your Liability
Accidents happen. Sometimes there’s nothing you can do. But you can take steps to try to keep something bad from happening.
Here are a few commonsense tips to reduce your business liability:
- Do everything you can to keep workspaces tidy, clean and safe. This helps prevent slips or other accidents.
- Make sure your products fall within legal requirements to keep lawsuits at bay
- Hang clear signs in the right places to help prevent issues
- Keep stairs and walkways well-lit, clear and hazard-free
Just remember that taking these steps makes you a responsible business owner. It doesn’t mean you can skip excess liability coverage.
How to Get Excess Liability Coverage
Don’t let the complex world of insurance keep you from getting the coverage you need. There’s a lot you can do to protect your business with a strong defensive plan—and part of that plan is a solid insurance package.
If you’re ready to get started on an excess liability policy, let one of our insurance agents shop for you. They can save you time and hassle by comparing the best plans for you so you can get back to running your business.
Our agents are also part of our Endorsed Local Providers (ELP) program, so you’ll be working with some of the best agents in the industry. And they’re RamseyTrusted, meaning they’ve been vetted by the Ramsey team.