What type of property coverage does excess insurance provide?

Excess insurance is designed to provide additional coverage above the limits set by a primary insurance policy. This kind of coverage kicks in when the losses exceed those primary limits, offering a safety net for individuals or businesses that may face substantial claims. For instance, if a homeowner has a primary homeowners insurance policy with a limit of $300,000 and incurs an $800,000 loss due to a disaster, the excess insurance would cover the remaining $500,000 beyond the initial policy limit.

This type of insurance is crucial for individuals who want to protect themselves from significant financial exposure. It provides peace of mind knowing that they have a buffer in place for exceptionally high claims.

In contrast, other options do not accurately describe the nature of excess insurance. For example, excess insurance does not serve as the initial source of coverage in the event of a claim; that role is held by primary insurance policies. It also does not cover all loss types indiscriminately nor does it focus solely on commercial activities, as excess insurance can be applicable to personal lines as well.