Excess Insurance

Example

“After the $2 million auto liability judgment exceeded his primary policy's $1 million limit, Robert's excess insurance policy covered the remaining $1 million.”

Memory Tip

Think of excess as 'X-tra coverage' - it kicks in when you need extra protection beyond your basic limits.

Why It Matters

Excess insurance protects your assets from catastrophic losses that exceed your primary insurance limits. In today's litigious society, even a single severe accident or lawsuit can result in damages that far exceed standard policy limits, making excess coverage essential for asset protection.

Common Misconception

Many people confuse excess insurance with umbrella insurance, thinking they're identical. While similar, umbrella policies typically provide broader coverage and may cover some losses not covered by underlying policies, whereas excess insurance typically only covers the same perils as the underlying policy, just in higher amounts.

In Practice

Jennifer carried a standard auto policy with $500,000 in liability coverage and a $1 million excess policy. When she caused a multi-car accident resulting in $1.3 million in damages, her primary auto insurance paid the first $500,000, and her excess policy covered the remaining $800,000. Without the excess coverage, she would have been personally liable for that $800,000, potentially forcing her to sell her home and other assets.

Etymology

From the word 'excess' meaning 'more than necessary or normal,' indicating insurance that covers amounts beyond standard policy limits.

Common Misspellings

Related Terms

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Other insurance terms you should know

See Also