What are Underlying Limits?
Underlying limits are the coverage limits in an insurance policy that must be exhausted before an umbrella or excess liability insurance policy can begin to provide coverage. These limits are set by the primary insurance provider, such as homeowners, auto, or general liability insurance, and they represent the base level of protection in case of a claim.
In personal and business insurance, having adequate underlying limits is crucial because umbrella or excess liability policies are designed to provide an additional layer of protection beyond these limits. For instance, if you have an umbrella insurance policy, it will only cover claims that exceed the underlying limits of your existing policies, such as your auto or homeowners insurance.
If the underlying limits are not met, the umbrella policy may not respond to a claim, leaving you with a potential gap in coverage. Ensuring that your underlying limits align with the requirements of your umbrella or excess liability insurance is essential to maintaining comprehensive protection.