How Excess Liability Insurance Works
An example is best used to illustrate how excess liability insurance works. Let’s use a personal excess liability insurance claim first: a guest in your home slips and falls on your pool deck, injuring themselves quite badly. They’re unable to work and sue you for damages. Your home insurance policy will include liability coverage for this type of incident, but in this case, the resulting legal battle and settlement means you quickly hit the limit of that coverage. Your personal excess liability insurance would take over once your home insurance liability was exhausted, providing additional coverage.
Let’s do a commercial example: say you manufacture a product that has an unexpected defect that has started a few fires. You’re sued for damages. Luckily, you have product liability insurance – but the lawsuit settlement exceeds the policy limit. Your excess liability insurance would be able to help cover the rest of the settlement costs.
If you did not have excess liability insurance for yourself or your business in the above two scenarios, you or your business would need to pay the difference out of pocket.
As you can see, your excess liability coverage is insurance for your insurance – it takes over when your existing liability policies are “maxed out.”