Louisiana P&C Adjuster Practice Exam

Which statement about excess liability insurance policies is true?

1. They cover all types of risks regardless of the base policy

2. They pay before the base policy limit is exhausted

3. They are always written as Stand Alone policies

4. They only cover the same risks as the base policy

The correct answer is: They only cover the same risks as the base policy

The statement that excess liability insurance policies only cover the same risks as the base policy is accurate. An excess liability policy is designed to extend the coverage limits of an existing base policy, such as a general liability or a commercial auto policy. It provides additional coverage for the same types of exposures that are covered under the primary policy once those primary limits have been reached. This means that while the excess policy increases the amount of coverage available, it does so for the same risks that are already covered by the base policy. Therefore, it won't typically cover new or different risks that aren’t included in the base policy. It is essential for policyholders to understand this relationship because it helps them assess their exposure and determine whether they need additional coverage or different types of policies.