Umbrella and Excess Liability policies are both designed to provide coverage above the limits of underlying coverage. The two policies are often mentioned interchangeably by insurance professionals. However, there is a difference between the policy forms.
Umbrella Policies
Umbrella policies are a type of excess liability that not only offers higher liability limits, but also broadens coverage for things that your underlying policy might not cover. For example, an umbrella policy could extend coverage territory to include worldwide coverage territory, which is often broader coverage territory than underlying policies cover.When additional coverage is provided by the umbrella policy, it is usually subject to the insured’s assumption of a self‐insured retention, or retained limit.
Excess Liability Policies
Excess Liability policies provide coverage above the limits of the underlying coverage. It offers no broader protection than that provided by the underlying policy. In fact, the excess liability coverage may even be more restrictive than the underlying coverage.
Most Umbrella and Excess Liability policies are not written on standardized forms, so it is always important to read your policies to see what they actually cover. In actual practice, the line between Umbrella and Excess Liability is often blurred. As previously alluded to, many Excess Liability policies are referred to as Umbrella policies. Since coverage definitions are developed by individual carriers, Umbrella and Excess Liability policies may vary in what they actually cover.