What’s the Difference Between Umbrella & Excess Liability Insurance?
Umbrella vs Excess Liability Insurance for Contractors
Contractors often hear both terms thrown around—umbrella and excess liability—but they’re not exactly the same. While both give you
extra coverage above your primary policies, the way they function behind the scenes can matter, especially when a claim hits. If you’re a contractor in Arizona using general liability, commercial auto, or employer’s liability coverage, it’s worth knowing the distinction. And more importantly, which works best for your business.
Umbrella Insurance: Broader Protection Across Multiple Policies
An umbrella policy is designed to sit above more than one type of liability policy—typically your general liability, commercial auto, and employer’s liability (part of your work comp policy). It not only adds higher limits to those policies but may also fill certain gaps if a specific liability exposure isn’t covered in the underlying policy, as long as it’s not excluded.
For example, in some cases, an umbrella might step in (called “dropping down”) if your base policy hits its aggregate limit or a specific type of claim isn’t covered. It’s not unlimited—there’s still a retention and limitations—but umbrellas often provide a bit more flexibility than a pure excess policy.
Excess Liability Insurance
An excess liability policy strictly extends the limits of the underlying policies. It doesn’t cover anything new. It follows the form of the underlying policies exactly—no more, no less. If it’s an excess GL policy, it will only apply after the general liability limit is exhausted, and it won’t fill in any coverage gaps. You must have a valid claim under the underlying policies for the excess policy to apply.
This format can be useful if you’re only looking to increase coverage for one high-risk area, such as general liability on a large construction contract.
Key Differences – Scope, Flexibility & Use Cases
Coverage Span:
Umbrella: Can stretch over multiple policies (GL, Auto, Employer’s Liability)
Excess: Can also stretch over multiple policies (GL, Auto, Employer’s Liability)
Drop-Down Potential:
Umbrella: May provide limited coverage for certain losses not covered by underlying policies (subject to retention)
Excess: Does not drop down—only activates after the full exhaustion of the scheduled underlying policy
Who Typically Uses What:
Most
Arizona contractors with small to mid-sized operations opt for an umbrella policy. It’s easier to manage, usually affordable, and offers broad protection across the types of liability that come up most often in construction. Larger contractors with custom insurance programs or surplus lines placements might use excess liability, especially if coverage is being layered across a more complex setup.
Pricing & Practicality for Contractors
You might find that excess liability coverage is a bit cheaper than umbrella coverage in some cases—especially if it’s only covering one policy. But often, the simplicity and versatility of an umbrella policy make it the better long-term choice. If a contract requires you to show proof of a certain limit across multiple types of coverage, an umbrella policy is the easier way to get there.
JP Insurance can also help when standard market umbrellas aren’t available (like if you’ve had claims or work in higher-risk trades). In those cases, we can source excess liability from surplus lines carriers and structure the protection you need.
Which One Should You Choose?
In most situations, a commercial umbrella policy is the better fit for contractors who want to increase coverage across their key liability policies. If you’re already carrying strong base policies—like $1 million per occurrence GL and auto—and want added protection without adjusting each one, umbrella is usually the way to go.
If you’re only trying to boost one policy’s limit (say, a general liability policy for a high-value project), and the umbrella isn’t an option, an excess policy can still do the job. Either way, the goal is to protect your business from lawsuits or claims that exceed your regular coverage.
How JP Insurance Group Helps You Choose the Right Layer
Whether your policy is labeled "umbrella" or "excess," we’ll make sure it does what you need: increase your protection in case of a big claim. We review your underlying coverage, determine where gaps might exist, and structure the right backup policy—so if something does go wrong, you’re not exposed.
And if your job in Tempe, Goodyear, Gilbert, or Surprise requires $5 million in liability limits, we’ll help get you there quickly and affordably—without guessing which policy type you need.
Frequently Asked Questions – Umbrella vs Excess Liability
What’s the main difference between umbrella and excess liability insurance?
The biggest difference is how broad the coverage is. An umbrella policy can extend liability limits across multiple policies (like GL, auto, and employer’s liability) and may offer limited coverage for some claims not in the base policies. Excess liability only increases limits for the underlying policies and doesn’t expand coverage beyond it.
Do contractors really need to worry about this distinction?
For most small to mid-sized contractors, the goal is simply higher liability limits—and either type of policy will do the job. The difference becomes more important for larger firms with complex exposures or when selecting between carriers with varying forms.
Does an umbrella policy cover more than an excess policy?
Possibly. Some umbrella policies offer drop-down coverage, meaning they could step in for certain claims not covered under the underlying policy—subject to specific terms and a self-insured retention. Excess policies don’t drop down; they only apply once the base policy is exhausted.
Is umbrella insurance more expensive than excess liability?
Not always. In some cases, a basic excess policy may be slightly cheaper if it's only covering one line of liability. But an umbrella that spans multiple policies may offer more value overall. We’ll help you compare both options.
Can I buy an excess policy if I already have an umbrella?
Yes, especially if you’re stacking layers of liability coverage. For example, you might have a $1M umbrella and then an additional $2M excess layer above that. This is more common for large contractors with contractual insurance requirements on major projects.
How do I know which one I need?
We’ll review your operations, existing policies, and project requirements to determine whether an umbrella, excess, or combination of both makes sense. The right fit depends on your risk exposure, budget, and how your policies are structured.
Let’s Build a Stronger Liability Wall
Have questions about how an umbrella or excess policy works with your current setup? Contact JP Insurance Group. We’ll walk you through the options and help you choose the right additional coverage—so your business stays protected, no matter what.