Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

Excess insurance and umbrella insurance serve distinct purposes in risk management, particularly when it comes to providing additional coverage beyond standard policy limits. Umbrella insurance is characterized by its ability to offer broader coverage compared to excess insurance.

While excess insurance typically increases the limits of underlying liability policies—covering specific types of risks like bodily injury or property damage—umbrella insurance extends its coverage to a wider range of claims. This includes not only higher limits on the same types of liability covered by excess insurance but also coverage for additional liabilities that may not be included in primary policies, such as personal injuries, defamation, or even certain situations arising from non-owned vehicles.

In this way, umbrella insurance adds an extra layer of protection that can be beneficial in a multitude of situations, beyond just increasing liability coverage limits. This explains why the assertion that umbrella insurance provides broader coverage is the correct choice in distinguishing it from excess insurance.