Q: Carriers often use the terms “umbrella” and “excess” interchangeably on their forms. What is the best way to tell if an umbrella policy is a true umbrella policy, or if it is actually an excess policy?

Response 1: It's regrettable that the companies use the terms interchangeably. As a general rule, umbrella policies provide coverage that is broader than underlying forms. Excess policies provide additional limits—they go above underlying limits and increase only the amount of coverage, not the scope of coverage.

Response 2: There is no shortcut on this. You need to review the schedule of underlying policies and the terms and exclusions on both excess or umbrella policies. When doing this, also consider differences on endorsements, such as additional insureds, primary wording and more. I have seen an umbrella policy for an offshore oil company exclude all operations over water, and one for a whiskey distillery with an absolute liquor liability exclusion.

Response 3: Carriers use a variety of terms to describe their umbrellas, and not all umbrellas are created equal. But you must read the policy thoroughly to determine what coverage it provides. Sometimes, a “true” umbrella is indicated by its own insuring agreement.

Another simple way to tell if it is an umbrella or excess policy is to compare the exclusions to the underlying policies. Check the coverage territory as it applies to auto liability. Look at the definition of bodily and personal injury. Another indicator is when the umbrella says there is no deductible or self-insured retention, which is sometimes because there is no broadening of coverage from the underlying policy.

If your agency has six umbrella carriers, that means you must read six policies. As you examine each of them, make notes so that you remember the differences next time.

Response 4: You must read the entire policy. Some policies purported to be umbrellas are not "true" umbrellas for all underlying liabilities. Instead, they become straight excess for some of the underlying liability coverages—meaning that they have elements of both umbrella and excess. There is no easy way to distinguish between these policies. 

Response 5: What distinguishes an umbrella policy from an excess policy is that the umbrella provides broader coverage in some situations, while excess policies follow the underlying forms’ coverages and exclusions. 

To understand the difference, compare the exclusions on the umbrella or excess policy with the underlying policies. Are they the same or are there exceptions to exclusions that provide broader coverage? You really need to read each form to appreciate the difference. 

Response 6: Since these are non-standard forms, you need to look at the definitions, exclusions and conditions to determine whether it is an umbrella or an excess. There is no easy way to evaluate these forms without careful review.

Response 7: Unfortunately, there is no easy way for an agent to determine the differences. You need to read all the carriers' umbrella and excess policies available to your agency and compare them.

A number of years ago, I developed a spreadsheet comparing the umbrella coverages provided by the 12 primary carriers in our agency. The differences were startling, and two carriers' forms clearly stood out. We then did the same thing with personal liability umbrellas.

This question was originally submitted by an agent through the VU’s Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.