Major functions and differences: both a commercial umbrella and an excess liability policy sit above underlying insurance and add limits. A follow-form excess policy takes on the underlying terms, so it cannot pay what the underlying excludes. An umbrella can also be broader than the underlying coverage and drop down over a retention, so it fills some gaps as well as adding height.

Most carriers have developed their own umbrella and excess forms, each with unique coverage, exclusions and conditions. Two quotes at the same limit can respond differently to the same claim, so an agent must read each form, not only compare price.

Required underlying policies: umbrellas commonly require scheduled underlying general liability, auto liability and employers liability at stated limits, and the insured must keep them in place. The umbrella does not drop down to replace limits the insured let go. Example: an umbrella requires $1,000,000 of underlying auto liability, but the insured let its BAP limit fall to $500,000. On a covered $1,500,000 auto judgment, the BAP pays $500,000, the umbrella pays the amount above $1,000,000 ($500,000), and the insured pays the $500,000 gap.

Self-insured retention (SIR): the amount the insured keeps and pays itself on a claim the umbrella covers but no underlying policy does. With a $10,000 SIR, a covered $60,000 claim that every underlying policy excludes is paid $10,000 by the insured and $50,000 by the umbrella. When an underlying policy does cover the claim, the umbrella simply sits above it and the SIR does not apply.