The Difference Between an Umbrella Policy and Liability Coverage

When it comes to insurance, there are two types of coverage that can be confusing: excess liability and umbrella insurance. They both offer extra protection, but they work differently. Let’s break down the key differences between them to help you understand which one might be right for you.

  1. Excess Liability Insurance

Excess liability insurance is like a backup plan for your existing insurance. It kicks in only after your regular policy’s limits are used up. It’s meant to give you extra coverage for specific situations, such as accidents or injuries. However, it doesn’t provide new types of coverage on its own and must be connected to your primary policy.

  1. Umbrella Insurance

Umbrella insurance is more comprehensive. It not only supplements your regular policies but also offers extra coverage for a wide range of risks. It can protect you from various liabilities like personal injuries, lawsuits, and accidents. It can be bought as a standalone policy, separate from your primary coverage.

Which One to Choose?

If you just want to boost your coverage for certain risks, excess liability insurance could be enough. But if you need broader protection across different areas, especially if you have a lot to protect, umbrella insurance might be the better choice.

Excess liability and umbrella coverage both provide extra protection, but they work differently. Excess liability extends your existing coverage, while umbrella insurance offers comprehensive protection across various policies. To decide which one is best for you, consider your risks and assets, and talk to your insurance agent, like LG Insurance Group, to make an informed choice. Having the right coverage ensures you’re prepared for unexpected events and gives you peace of mind.

Demystifying Co-Insurance Clause in Property Insurance Policies

When it comes to protecting our homes, businesses, or personal belongings, property insurance is crucial. However, it’s essential to understand the different clauses and terms in your insurance policy. One such clause is the co-insurance clause, which affects how much coverage you receive in case of a loss. In this blog post, we will explain the co-insurance clause in simple terms, so high school students can grasp its significance in property insurance.

What is Co-Insurance?

Co-insurance in property insurance means sharing the risks and costs between the policyholder and the insurance company. It’s an agreement that requires the insured person to maintain coverage for a certain percentage of the property’s total value. This percentage is usually specified in the insurance policy and is known as the “co-insurance percentage.”

Understanding the Co-Insurance Clause:

The co-insurance clause ensures that you have enough coverage for your property relative to its value. It prevents underinsurance, which is when people intentionally or unintentionally undervalue their property to pay lower premiums.

How Co-Insurance Works:

To figure out the co-insurance penalty, you need to calculate the “insurance to value” ratio. This ratio compares the amount of insurance you have to the actual value of the property. Here’s the formula:

Insurance to Value Ratio = (Insurance Carried / Insurance Required) × 100

If the ratio is equal to or greater than the co-insurance percentage stated in your policy, you’ll be fully covered for any losses. However, if the ratio is less than the co-insurance percentage, a co-insurance penalty will come into play.

Co-Insurance Penalty:

When a co-insurance penalty is triggered, the insurance company won’t fully reimburse your loss. Instead, they will pay only a portion based on the co-insurance ratio. Here’s the formula to calculate the claim payment:

Claim Payment = (Actual Loss × Insurance Carried) / Insurance Required

Let’s say you have a property worth $500,000, and your co-insurance percentage is 80%. If you have insurance for only $350,000 (70% of the property’s value), then you do not meet the 80% threshold required in your policy. If you suffer a loss of $100,000, the insurance company will calculate your claim payment like this:

Claim Payment = ($100,000 × ($350,000) / $500,000) = $70,000

In this case, the insurance company will only reimburse you $70,000 instead of the full $100,000 because you didn’t meet the co-insurance requirement, less the applicable policy deductible.

Importance of Adequate Coverage:

The co-insurance clause emphasizes the importance of having enough coverage for your property. If you don’t, you could face significant financial losses when making a claim. It’s crucial to review your insurance policy regularly to ensure that the insured amount matches the current value of your property.

Tips to Avoid Co-Insurance Penalties:

  1. Get an Accurate Valuation: Have your property professionally appraised to determine its actual value. This will help you set an appropriate insured amount.
  2. Seek Advice: Consult an experienced insurance agent or broker who can explain the co-insurance clause and help you choose the right coverage limits.
  3. Review Your Policy: Periodically reassess your insurance needs to account for any changes in property value, renovations, or new acquisitions that may require adjustments to your coverage.


The co-insurance clause in property insurance is a significant provision that ensures you have adequate coverage for your property’s value. By understanding this clause and taking steps to avoid co-insurance penalties, you can protect your assets effectively. Regularly reviewing your policy and seeking guidance from insurance professionals will help you make informed decisions, providing you with peace of mind, knowing your property is properly safeguarded.