What does the term "excess liability" refer to?

The term "excess liability" specifically denotes insurance designed to provide coverage beyond the limits set forth in other underlying insurance policies. This type of coverage acts as a supplementary layer of protection, particularly beneficial when the costs associated with a claim exceed the limits of the primary liability insurance. It is essential for businesses or individuals looking to shield themselves from potential financial losses that can arise from large claims or unexpected situations that might exceed their primary policy limits.

For example, if a company's general liability insurance has a limit of $1 million and a claim arises that is assessed at $1.5 million, an excess liability policy would cover the additional $500,000, thus preventing the insured from experiencing significant out-of-pocket expenses. This illustrates how such policies are crucial for enhancing financial stability and risk management strategies.

In contrast, the other options presented do not accurately capture the essence of excess liability. Coverage that only addresses the first part of a claim would not provide the additional protection needed once limits are exhausted. Coverage for intentionally caused damage is generally excluded under most liability policies since liability insurance is not meant to cover willful actions. Lastly, basic liability coverage for small businesses typically pertains to foundational protection rather than the excess coverage that enriches financial defenses against larger claims.