How Does Excess Layer Insurance Work?

Excess layer insurance - Shows a building under construction

If you’re tendering for a contract that specifies a higher liability limit than your policy covers, excess layer insurance could be the solution. In this guide, we explain what it is, how it works, and how it can help contractors to grow their business.


What is excess layer insurance?

Excess layer insurance is an add-on to your commercial insurance policy. It provides a higher maximum level of public liability and employer’s liability compared to standard.


Why do does my business need excess layer insurance?

Most public liability insurance policies have a maximum limit of £5million. Most employer’s liability insurance policies set a maximum limit of £10million. But increasingly, organisations are asking their contractors to hold higher levels of cover. If your contractor’s insurance policy can’t be increased, or the cost of increasing it is prohibitive, excess layer insurance can solve the problem. It allows the business to purchase a higher level of protection in a cost-effective way.

Shows a collection of architectural plansWhat businesses need excess layer insurance?

The majority of businesses requesting excess layer insurance will be in the construction industry. That’s because of the significant costs associated with building works if they go wrong. It’s not just the trades that need cover. Professionals such as architects and designers may also need a policy to boost their professional indemnity insurance limit.


It also provides peace of mind at a cost-effective price for product manufacturers. If a product fails multiple times, compensation can quickly mount up and exceed limits set by a standard products liability insurance policy.


You can purchase excess layer insurance as an add on to:

  • Employer’s liability
  • Public liability
  • Product liability


Can high-risk businesses take out excess layer insurance?

Yes, any business can take it out. This includes high-risk services such as:

  • Cladding contractors
  • Scaffolding


And it includes activities where special heat, height, and depth requirements are specified. For example, businesses with employees working at heights or with employees working underground


Excess layer insurance cover - Construction workers building a homeWhy do I need so much cover?

£5 million might seem like a considerable amount, but if something goes wrong because of your business, legal fees and compensation can quickly mount up. Bear in mind that you can be sued not just for putting right something that has gone wrong. You can also be asked to pay compensation for costs associated with delays to the project completion.


If more than one person is seriously injured as a result of something to do with your business, the claim can also quickly spiral above liability limits. The rates of compensation have drastically increased in recent years, thanks to the Ogden rate change. If your business has not reassessed employers and public liability limits in the last few years, it’s likely your limits won’t be sufficient.


What is the Ogden rate?

Also known as the discount rate, the Ogden rate is the rate used by insurance companies to decide how much compensation should be awarded if someone is injured because of something to do with your business. In 2017, the rate was cut from 3.25% to -0.75%. This change has doubled, and in some cases trebled, the levels of public liability payouts. That’s because it assumes that any award will be invested to provide an income over the term of the individual’s life expectancy. With interest rates low, it was decided that awards must be higher to ensure claimants are adequately provided for.


How does excess layer insurance work?

You simply purchase the required extra amount of cover you need.


For example:

You’ve won a new contract with the local authority. Your insurance specifies up to £5million cover, but the contract requires £10million. You purchase £5million with an excess layer insurance policy. Together that comes to the required £10 million of cover.


If you make a claim, your primary insurer will pay out all claims up to the limit specified in that policy. The insurer that provides the excess layer policy will pay out claims above that limit, up to the maximum amount of the excess layer policy.


Shows a stack of coinsFor example, using the situation above, if there is a claim totalling £7 million, the primary insurer will pay out £5 million and your excess layer insurance company will pay out the additional £2 million.


How much extra cover can I purchase?

You can get up to £50 million public liability or employer’s liability cover with an excess layer policy. Check your contract to see what you need, and speak to your broker to make sure you’re not paying for protection you don’t need.


How do I buy excess layer insurance?

A specialist broker, like Park insurance, can help source the right level of cover at the best value cost. You could purchase it as part of your commercial package or as a separate policy.


How do I get the best price on excess layer insurance?

You can purchase excess layer insurance as an annual policy. Alternatively, if the project you need the extra cover for is one-off and short-term, it could be more effective to purchase it for the duration of that project only. Speak to your broker for more advice.


Excess layer insurance cover - Shows a construction wheelbarrowPark Insurance: helping businesses for 30 years

If you need excess layer insurance, our advisers are here to help. We can talk through your exact situation to identify the best cover to meet your needs.


Park Insurance is a family-run, independent insurance brokerage. We’ve been helping business of all sizes for 30 years with a range of tailor-made policies to cover every risk. We’ll use our expertise and contacts to source robust insurance you can rely on in a crisis. We’ll explain exactly what the cover includes and we can answer your questions, so you are 100% happy.


If you do need to make a claim, you can rest assured that your dedicated account manager will take control, for your total peace of mind. We’ll deal with the claim swiftly, saving you time and hassle. For more information, please speak to one of our experienced team members on 0117 955 6835 or get a free quote today.