General liability insurance is the first line of defense in the event of a third party claim against the policyholder. Umbrella liability insurance is intended to respond in the event the general liability policy is exhausted or does not cover the loss.
- Liability insurance policies have limits per occurrence on the amount the policy will pay in the event of a single claim. Policy aggregate limits restrict the amount the policy will pay regardless of the number of claims or occurrences.
- The first liability policy to respond to a claim is known as the primary policy. Other policies will not have an obligation to pay claims until the policy limit has been exhausted through claim payments.
- Umbrella liability policies will respond to a claim in the event of a catastrophic loss in excess of the per occurrence limit of the primary general liability policy.
- In the event a series of claims has exhausted the general liability policy's aggregate limit, the umbrella liability policy will also respond to covered claims.
- In certain instances, the umbrella liability policy may also cover claims that are not covered by the primary general liability policy. In this event, the policyholder is required to satisfy a self-insured retention prior to the umbrella policy's payment of any claims.
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