Excess insurance provides coverage when claims exceed primary insurance policy limits. It can be used to provide additional coverage on major policy types and is less expensive than purchasing a prime policy with high coverage limits. It is important to have adequate insurance coverage to avoid costly mistakes.
Excess insurance is insurance that provides coverage in the event that claims exceed the limits set out in primary insurance policies. It is sometimes called umbrella insurance, although some insurers do not use these terms interchangeably. When purchasing insurance products, it is advisable to ask an insurer for a specific and clear definition of a policy type so that the terms are understood and there is no confusion about what is covered.
A typical primary insurance policy has deductibles and coverage limits. Deductibles require people to pay out of pocket for at least part of insurable events, and deductibles can vary depending on the terms of the policy. Coverage limits place a limit on the total payment amount available. If an incident exceeds the threshold, people are expected to pay for cost overruns. When these costs are very high, this can present a significant difficulty.
Excess insurance is designed to remedy these situations. Once primary coverage is exhausted, people can file a claim against insurance policy excess, which will cover the difference. This type of coverage can be used to provide additional coverage on many major policy types. As a general rule, true overinsurance only kicks in when primary policies exceed their coverage limits. People should be aware that some insurers use the term “comprehensive insurance” to refer to policies that will fill gaps in coverage by stepping in before the main policies are excluded.
Purchasing a prime policy with high coverage limits can be extremely expensive. The combined costs of a reasonable primary policy to cover most events and an excess insurance policy to deal with catastrophes are generally lower, and coverage can be better. Insurance agents can provide people with information about specific insurance products that may be relevant to their needs, including information about excess insurance that fits well with existing major policies.
It is important for people to be sure they have adequate insurance coverage. For example, a property owner must secure a vehicle liability policy that meets or exceeds the value of the property, in the event that there is a lawsuit and the plaintiff attempts to sue the full value of all the driver’s assets. For business owners and homeowners alike, not having the right kind of coverage and not having enough coverage can be a very costly mistake.
Asset Smart.
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