As the name implies, this coverage form provides a secondary layer of liability insurance that sits above your ‘primary’ business insurance.  Like an Umbrella…

Umbrella insurance refers to a separate liability insurance policy that is in excess of specified other policies – called “Underlying Policies”. Some forms can also potentially be primary insurance for losses not covered by the other policies.

In the event of a covered loss, the primary insurance policies pay up to their limits. Then additional amounts are paid by the umbrella policy (up to the limit of the umbrella policy).

Excess Insurance is similar in that it pays after an underlying primary policy is exhausted, but is different because

1)   Excess insurance normally applies to only to the listed underlying primary policy and

2)   Covers only those losses that are covered by the primary policy. For example, if the primary policy does not cover liability due to pollution, the excess policy does not either. But an umbrella policy could cover pollution liability from the first dollar in addition to liability of other kinds that is simply beyond the primary policy’s limit. The policy is said to “drop down” to cover the pollution liability as primary insurance and fill in the gaps in the underlying policies.

The term  “umbrella” refers to the potential broad coverage of the policy.


  • Umbrella policies are NOT STANDARD – each company’s form may differ
  • Some so called Umbrella policies are really EXCESS policies
  • If you fail to meet the requirements for “Underlying Insurance” you will be responsible for what the underlying insurance should have been

Many Umbrella Policies DO NOT cover

  • Professional Liability
  • Employment Practices Liability
  • Directors and Officers Liability 

Read the forms with care.