What does excess coverage do in relation to primary coverage?

Excess coverage is designed to provide additional financial protection that kicks in after the limits of primary coverage have been reached. When losses occur, the primary insurance policy will pay out up to its specified limit first. Only once that limit has been exhausted does the excess coverage come into play, offering further compensation for valid claims. This is particularly useful in situations where the losses exceed what the primary policy covers, ensuring that the policyholder is not left with a significant financial burden when primary coverage limits are met.

Understanding this relationship is crucial for policyholders in managing risks and ensuring comprehensive coverage, as it highlights the layered nature of insurance where primary policies are complemented by excess or secondary policies to bolster overall protection against more substantial losses.