Umbrella Policy: provides excess liability coverage over several of the insured’s primary liability policies. Umbrella policies have three functions: (1) to provide additional limits above the each occurrence limit of the insured’s primary policies; (2) to take the place of primary insurance when primary aggregate limits are reduced or exhausted; and (3) to provide broader coverage for some claims that would not be covered by the insured’s primary insurance policies, which would be subject to the policy retention. Most umbrella policies usually state it will pay the ultimate net loss, which is the total amount in excess of the primary limit for which the insured becomes legally obligated to pay for damages of bodily injury, property damage, personal injury, and advertising injury.
All umbrella liability policies contain an each occurrence limit of insurance. Some umbrella liability policies may have a separate limit that applies to all personal and advertising injury for one person or for the organization. Also, some policies are written with aggregate limits for only one type of loss. Other policies may have one or more aggregates for all losses. Umbrella policies can be written with several different variations of the aggregate limits. There are no standard umbrella policies.
Retention: the amount of the loss an insured must pay before the umbrella policy would be required to respond. The self insured retention would only apply when a loss is excluded from coverage under the primary policy, but not excluded under the umbrella policy.
Required Underlying Limits: This requires the insured to have certain types and amounts of primary insurance before the umbrella policy can be written.