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 Michigan, excess insurance is designed to offer additional protection beyond the limits of the insured's primary policy. It activates when a claim exceeds the coverage limits of the insured's standard policy. Excess liability insurance specifically adds further coverage to a primary liability policy, such as general liability or commercial general liability, and follows the terms of that underlying policy. Umbrella insurance, while similar, differs in that it extends coverage over multiple underlying liability policies, such as auto, general liability, or employers' liability insurance. It not only provides additional limits but may also broaden coverage to include risks not covered by the underlying policies. Both types of insurance serve as a safety net for policyholders, providing financial security in the event that claims surpass primary policy limits. It's important for individuals and businesses in Michigan to understand their insurance needs and ensure they have adequate coverage to protect against potential risks that could lead to substantial financial loss.