Excess insurance is insurance that covers the insured against certain risks and applies only to loss or damage in excess of a stated amount, or of a specified primary insurance policy or amount of self-insurance.

Although the terms excess liability insurance and umbrella insurance are sometimes used interchangeably, there is an important distinction. Excess liability insurance provides additional coverage for one of your primary liability insurance policies (general liability insurance, commercial general liability insurance) and kicks in with an additional amount of coverage under the same terms as the underlying, primary policy. Umbrella insurance provides additional coverage for several underlying liability policies and kicks in when proceeds from one of those policies reaches its limit.

In insurance industry jargon, both excess liability insurance policies and umbrella insurance policies are said to “sit on top of” the underlying liability insurance policy or policies.

In California, excess insurance is designed to provide additional coverage beyond the limits of the insured's primary policy. It activates only when the primary insurance has been exhausted. This type of insurance is particularly important in California where lawsuits and claims can be substantial, potentially exceeding the limits of standard insurance policies. Excess liability insurance specifically extends the coverage of a primary liability policy, such as general liability or commercial general liability, with the same terms and conditions, but with additional limits. Umbrella insurance, while similar, differs in that it can provide broader coverage and may cover multiple underlying liability policies, such as auto, general liability, and employers' liability. It can also cover certain risks that are not covered by the primary policies. Both excess liability and umbrella insurance are crucial in managing risks and providing a safety net for businesses and individuals against significant financial losses that exceed their primary insurance coverage.