Which type of insurance provides coverage beyond the primary policy limits?

The type of insurance that provides coverage beyond the primary policy limits is known as excess insurance. This type of policy comes into play when the limits of the primary insurance have been exhausted. Essentially, excess insurance acts as an additional layer of protection, offering coverage for claims that exceed the monetary limits set forth in the primary policy.

For example, if a primary liability insurance policy has a limit of $1 million and a claim arises that costs $1.5 million, the excess policy would cover the additional $500,000. This secondary coverage is particularly valuable for individuals or businesses that have significant assets to protect and want to mitigate the financial risks associated with large claims.

Understanding the role of excess insurance is crucial, as it ensures that there are financial resources available even when primary coverage is insufficient. This type of insurance is especially significant in industries or scenarios where the potential for high claims exists, providing peace of mind and enhanced security.