General Liability Insurance vs. Umbrella

by Tom Zuo; Updated September 26, 2017

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.

Limits of Liability

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.

Primary Insurance

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 Insurance

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.

Aggregate Exhaustion

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.

Uncovered 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.

About the Author

Living in Southern California, Tom Zuo is a risk-management professional with decades of experience. He has been writing since 1985, specializing in topics related to insurance and risk management. Zuo holds a Bachelor of Arts in English and mass communication.