Primary vs Excess Insurance Coverage

Primary insurance kicks in immediately when you suffer a loss, and excess handles any extra loss when primary coverage is used up.

The insurance carrier holding the “primary” policy normally has the first and main duty to defend any claims made against the insured (person or entity for whom the policy is written).

An excess insurance is one that covers a loss that is already covered by another policy (the “primary” insurance), but only if the amount of the loss exceeds the limitations of the primary policy. The various policies can be thought of as layers. The primary policy is the first layer, followed by the excess policy.

An insurance adjuster may assert that their policy is “excess” when their policy has an “other insurance” provision. This means that the other insurance policies must be used up before the adjuster will agree to pay for your loss.

The “other insurance” provision modifies or limits your available benefits when excess insurance coverage applies to your incident.

The phrase “other insurance” does not always refer to the same thing.

Courts have fought over the interpretation of “other insurance” terms and claims that a policy is “excess.” An “other insurance” clause can have varying implications depending on the particular language of the policy and the intent of the parties when the insurance was obtained.

If an insurance company claims that a policy is excess when it should be primary, the company may be committing bad faith and violating the law.

If you suspect you are not receiving all of the coverage you are entitled to, you should evaluate your policy and consult with an insurance attorney.

Primary Insurance Requirements

There may be some restrictions based on timing and context, such as the promptness with which the claim must be reported, but the insurer’s duties generally follow a similar pattern in each case.

Each primary insurance has a limit on the amount of coverage available and typically establishes deductible limits for the consumer. Primary plans pay out regardless of whether there are other policies covering the same risk that are outstanding.

Primary Insurance and Medicare

In medicine, primary insurance often refers to the first payer of a claim, up to a specific coverage limit, above which a secondary payer is expected to cover additional amounts. Those with commercial insurance policies who also have Medicare coverage as a secondary policy, for example, would have their primary insurance cover claims up to the cap.

Excess Insurance

Excess insurance pays for a claim after the primary insurance limit has been reached or used up. For instance, if the primary insurance coverage limit was $50,000 and the excess policy covered an additional $25,000, a $60,000 claim would result in a $50,000 reimbursement from the primary insurance and a $10,000 payout from the excess policy.

Excess policies, also known as supplemental policies, expand the primary policy’s or the underlying liability policy’s insurance coverage limit.

In other words, even before excess policy is utilized, the underlying policy is eligible to claim any portion of a claim. Therefore, the underlying policy may not be a primary insurance policy, but rather an excess policy.