An umbrella or excess liability policy provides additional coverage limits above your underlying general liability, D&O, and auto liability policies. When a claim exceeds the limits of your primary policy — a catastrophic injury at the pool, a large-scale discrimination lawsuit against the board, a multi-vehicle accident in the parking structure — the umbrella responds to cover the excess.
For most community associations, the umbrella policy is the most cost-effective coverage in the entire program on a per-dollar-of-coverage basis. Adding $5M or $10M in umbrella limits often costs a fraction of what the primary GL policy costs, because the umbrella only pays after primary limits are exhausted.
Why associations are commonly underinsured here
Many governing documents specify minimum umbrella or excess coverage limits. A Declaration might require $5M in aggregate liability coverage, which typically means the board needs primary GL ($1M/$2M) plus an umbrella to reach the required threshold. Boards often don’t check whether their current umbrella limit still meets the governing document requirement, especially if the declaration was amended to increase minimums.
Additionally, as property values and exposure profiles change, the underlying liability coverage should be re-evaluated. A community that added a fitness center, expanded the pool area, or converted to valet parking has a different liability profile than when the original coverage was placed.
Umbrella vs. Excess — what’s the difference?
In practice, these terms are often used interchangeably for association policies, but there is a technical distinction. A true umbrella policy can provide broader coverage than the underlying policies (filling gaps) in addition to higher limits. A pure excess policy only provides additional limits — same terms and conditions as whatever it sits over. Most association “umbrella” policies function closer to excess policies in practice, but the specific form matters.
Common Elements will help associations evaluate and place appropriate umbrella and excess coverage when we launch. Join our waitlist for updates.