The Difference Between Umbrella and Excess Insurance


Whether as a private individual, a business owner, or a family, getting the right insurance to safeguard your livelihood is an essential yet complex undertaking.

There are countless different terms for different insurance types, of which there are thousands of different policy types. On top of this, some insurance policies that sound very similar can have dramatically different implications for your own coverage-

One of the most common misunderstandings around insurance is the difference between umbrella and excess insurance. By getting to know the two, you can make more informed decisions about your coverage.

Main Difference Between Umbrella and Excess Insurance

So, how does excess insurance differ from an umbrella insurance policy? The answer lies in what each one covers and why. Umbrella insurance simply extends the coverage of any existing, primary insurance policy.

It adds additional protection for liabilities not covered in your primary insurance. Meanwhile, excess insurance supplement primary coverage in a different way. It directly provides additional funds to use if your primary policy limits are exhausted.

It is not a standalone policy like umbrella liability insurance, but rather a rider or endorsement to an existing policy. In different ways, both types of insurance work to reduce your out-of-pocket costs.

Requirements & Eligiblity

Before deciding which one is right for you, it’s worth checking what you qualify for. Umbrella insurance is available to individuals and businesses and has broader eligibility criteria. However, insurers may require you to meet certain requirements, such as minimum liability limits on primary policies.

Excess insurance is usually purchased by businesses to enhance their liability coverage. It may be tailored to specific industry risks and often requires businesses to have primary insurance coverage in place before obtaining excess coverage. In this way, excess insurance is not usually available to individuals or households.


You might be wondering if one option is any cheaper than the other. This depends. Umbrella insurance involves higher premiums due to its broader coverage and higher limits. However, the cost varies depending on factors such as coverage limits, the insured’s risk profile, and underwriting criteria.

Excess insurance generally has lower premiums. This is because it provides coverage only after primary policy limits are exhausted. The cost of excess coverage may be influenced by factors such as the level of primary coverage, industry risks, and claims history.

How To Figure Out What’s Right for You

Figuring out the right policy for you depends on your own risks and what you need from insurance. This can be complex, which is why it’s always worth speaking to a provider that offers expert counseling and advice, beyond sales.

For example, this North Carolina insurance agency is an independent agency that claims to advocate for customers rather than the big insurance companies. Going down the independent route can be a way to get fair, tailored advice about which policy genuinely will work best for you.

Safeguard Your Wealth in 2024

The difference between umbrella and excess might seem small, but the implications on your business and your wealth can be massive.

With the right foresight and know-how, you can understand the small differences that add up to large impacts on your financial planning. For more no-nonsense finance tips and insights, make sure to consult our dedicated Finance guides for actionable guidance you can trust.