If you have ever looked at an insurance policy and wondered what you would do if your possible damages exceeded the coverage, there is an easy answer. Excess insurance coverage is designed to supplement your regular insurance by essentially expanding its maximum payout in the event of a catastrophe that results in damages beyond the policy maximum. If you are thinking about buying a policy, there are a few facts to consider.
1. Excess Coverage Is Not Always Necessary
If your potential damage will never exceed the policy maximum, then you do not need an excess policy. It’s that simple. Working with an experienced insurance professional can help you understand what your potential damages will cost under different scenarios, which helps you understand if you need the extended coverage.
2. An Excess Insurance Policy Is Narrow in Scope
The coverage offered by excess insurance is usually tailored to one specific area of your insurance plan. For example, a business with little exposure outside of a commercial vehicle policy might buy excess coverage for just its vehicle policy. If you need an overall extension of coverage that takes care of a wider range of coverage options, you want to ask about an umbrella policy.
3. Excess Insurance Is Priced To Be Accessible
Since the policy only has to pay claims after your primary insurance reaches its policy maximum, excess insurance coverage is usually a fraction of the cost of that original policy. Considering the size of the risk it handles, it is a very cost-effective solution to a very costly risk management issue.