What is the difference between an Umbrella and an Excess policy, and how do you complete a Certificate of Insurance?

Umbrella and Excess policies both provide increased limits over the underlying policy.

In some instances an Umbrella policy may drop down and provide coverage where there is no coverage in place, usually subject to a Self-Insured Retention (SIR.)  An Excess policy will only respond when an underlying policy responds. 

Examples of when you might see an exposure not covered under an underlying policy and where an umbrella might respond:

• An Umbrella policy may allow for worldwide coverage so it may cover auto liability in a foreign country even though  the commercial auto policy does not extend to foreign countries.
• Non-Owned Aircraft or Watercraft.  

Be cautious though as Umbrella polices often contain a fair number of exclusions to align it more closely to cover that which is covered by primary policies. Umbrella policies tend to be quite a bit longer for this reason. An Excess policy will align with the primary policy. 

So how do you know what you have when you look at an Umbrella or Excess policy? Typically the policy will note whether it is an Umbrella or Excess.  Excess policies generally do not have an SIR. When you read the Coverages under the policy, for an Excess policy, that lead-in language will be something like:

“The insurance provided under this Coverage part will follow the same provisions, exclusions and limitation that are contained in the applicable underlying insurance. The coverage provided under this Coverage Part will not be broader than that provided by the applicable controlling insurance.” 

Conversely, an Umbrella policy may read something like this:

“We will pay on behalf of the insured the loss in excess of the self-insured retention because of bodily injury or property damage to which this insurance applies. We have the right and duty to defend the insured against any suit seeking damages for bodily injury or property damage when the underlying does not provide coverage or the limits of underlying insurance have been exhausted. However, we have no duty to defend any suit to which this insurance does not apply.” 

So, review any Umbrella / Excess policy and you should be able to fairly quickly identify what you have to complete the Certificate of Insurance. If you are looking at contract compliance, you may also need to identify any exclusions that the contract does not allow. 

Now for the disclaimer: This article is written in a very broad fashion and will not be used in any claims settlement. The actual policy and circumstances surrounding a claim take precedence. There may be some exclusions and limitations not addressed in this brief article.

Terri Moran

Insurance industry veteran Terri Moran leads the underwriting and operational strategies for the MOVER’S CHOICE program. Throughout her career, Terri has held roles in leadership, underwriting and marketing with national insurers. A staunch industry advocate, she has served as a member of the WSIA Internship Committee, working to attract young professionals to career opportunities.

In her spare time, in addition to enjoying her family, she is a Member and past Chair of the Board of Directors for the Surplus Lines Association of California.