What is the deductible form used in an umbrella liability policy?

In an umbrella liability policy, the correct term for the deductible form is referred to as the retained limit. The retained limit represents the amount of loss that the insured must cover before the umbrella policy will begin to pay. This is significant because the umbrella policy is designed to provide coverage above and beyond the limits of underlying primary insurance policies.

For example, if the underlying policy has a limit of $300,000 and a claim occurs that is assessed at $1 million, the insured would be responsible for the initial $300,000 (the retained limit) before the umbrella policy steps in to cover the remainder of the claim.

Understanding this concept helps underscore the purpose of umbrella insurance, which is to bridge the gap between standard liability coverage and the potentially higher costs associated with serious incidents. It also emphasizes the importance of being aware of what amounts will need to be covered by the insured party before additional coverage applies.