What is the purpose of excess insurance?

Excess insurance serves the fundamental purpose of providing additional coverage beyond what is offered by a primary insurance policy. This type of insurance acts as a supplement, kicking in when the limits of the primary policy have been exhausted. For instance, if a primary policy provides coverage up to a certain amount for liability, once that limit is reached, excess insurance can help cover the additional amount of a claim. This is particularly useful in scenarios where liability risks are high, allowing policyholders to safeguard against potentially overwhelming financial losses that could exceed their primary coverage limits.

By ensuring that further financial coverage is available after the primary policy’s limits are reached, excess insurance functions as a crucial risk management tool. It does not provide coverage for multiple properties, reduce premiums, or limit liability coverage to a specific amount; these aspects pertain to other types of policies and endorsements.