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Umbrella Liability Coverage

Umbrella liability insurance provides excess liability coverage over several of the insured's primary liability policies. Most umbrella liability policies provide coverage that is more extensive than the insured's primary policies. An excess liability policy may be what is called a following form policy, which means it is subject to its own terms only; or it may be a combination of these two types of excess policies.

Umbrella policies have three functions:
  1. Provide additional limits above each occurrence limit of the insured's primary policies.
  2. Take the place of primary insurance when primary aggregate limits are reduced or exhausted.
  3. Provide extensive 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 liability policies contain one comprehensive insuring agreement. The agreement usually states 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.

The self-insured retention is 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.

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