excess liability
Definition
Excess liability is extra insurance coverage that kicks in after your regular insurance policy has paid out its maximum amount. Think of it as a backup layer of protection that covers costs beyond what your standard policy can handle. Businesses buy this coverage because lawsuits and major accidents can easily exceed the limits of a typical insurance policy.
Example
Your general liability policy covers up to $1 million, but a customer wins a $3 million lawsuit against your business, so your excess liability policy steps in to cover the remaining $2 million. Without that extra coverage, you would have to pay that difference out of your own pocket.
Watch Out
Excess liability only pays after your underlying policy is completely exhausted, so you need to make sure your primary coverage limits are high enough to handle everyday claims on their own.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.