What does "excess insurance" provide to policyholders?

Excess insurance is designed to provide coverage that goes beyond the limits of the primary insurance policy. When a policyholder has a primary insurance policy with specific coverage limits, if a claim occurs that exceeds those limits, excess insurance will kick in to cover the additional amounts up to its limit. This type of coverage is particularly useful for individuals or businesses with significant potential exposure to large claims, as it offers an extra layer of financial protection.

For instance, if a business has a general liability policy with a $1 million coverage limit and faces a claim of $2 million, the primary policy would only pay $1 million, leaving a potential shortfall of $1 million. An excess policy would cover that additional amount, ensuring that the policyholder is not left with a financial burden beyond what their primary insurance covers.

The other options focus on different aspects of insurance, but they do not accurately reflect the function of excess insurance. Additional coverage for property damage and coverage for legal liabilities may exist within different types of policies, but they do not specifically address the manner in which excess insurance provides a safety net beyond existing policy limits. Meanwhile, lower premiums for high-risk individuals typically pertain to certain underwriting strategies and do not describe the nature of excess insurance.