Louisiana P&C Adjuster Practice Exam

What type of policy might cover the additional liability resulting from Jack's accident after the base policy limits are reached?

1. General Liability Policy

2. Premium Liability Policy

3. Excess Liability Policy

4. Standard Liability Policy

The correct answer is: Excess Liability Policy

An Excess Liability Policy is designed specifically to provide coverage for liabilities that exceed the limits of an underlying policy, such as a standard general liability insurance policy. When a claim arises, if the damages surpass the limits set in the base policy, the Excess Liability Policy kicks in, offering additional protection and ensuring that costs above the base policy limit are covered. This is particularly pertinent in situations like Jack's accident, where the potential financial burden could exceed his primary coverage. General Liability Policies typically cover a wide range of liabilities but have specific limits that, when reached, leave the insured exposed unless they have additional coverage. Premium Liability Policies do not exist as a standard term in the insurance industry; rather, they may refer to policies with higher coverage limits but do not specifically address higher limits beyond a base policy. Standard Liability Policies usually provide the baseline amount of coverage but do not extend beyond that limit. Thus, in the context of increasing liability exposure following an accident, an Excess Liability Policy is the appropriate choice as it serves to enhance the coverage limits when facing significant claims.