When it comes to protecting your business, the right insurance limits can make all the difference between a manageable claim and a devastating financial loss. And new clients and other trading partners often require you to increase your limits of coverage 2025.
Whether you are considering higher limits for Cyber, E&O, D&O, or EPL Insurance, the decision isn’t just about buying “more” – it is about aligning your coverage with your actual exposures, contract requirements, and evolving risks. Here’s what you need to know before increasing your insurance limits.
Why Increase Your Limits?
The business landscape is more complex than ever. Contracts with clients – and sometimes even vendors – are increasingly specifying higher insurance requirements (see Navigating Contract Requirements for Cyber Insurance). At the same time, the size and frequency of claims, especially in areas like Cyber Insurance, continue to grow, and a cyber claim at a vendor or client can directly impact your business. If your business is expanding, taking on larger projects, or entering new markets, your current coverage may no longer be sufficient.
Your Options: Higher Limits or Excess Policy
When you need more coverage, you typically have two options:
Increase Your Current Policy Limits: The simplest route is to ask your current carrier to raise your policy limits. This can be cost-effective and seamless, but not all carriers are willing or able to accommodate large increases, especially if you are a smaller business, your risk profile has changed, or you have had recent losses.
Purchase an Excess Policy: You can increase your insurance limits by purchasing an excess policy which sits on top of your primary coverage and pays claims after the underlying limit is exhausted. Excess policies are often provided by a different carrier, and you can stack multiple excess policies to reach the total limit you need. While this approach is common for larger businesses, it is also common for organizations with Cyber, E&O, D&O, EPL Insurance and other unique exposures. Using an excess policy can provide flexibility if your primary insurer’s capacity is limited.
What Is an Excess Policy?
An excess policy extends your protection beyond the limit of your primary policy. The excess policy “attaches” at the maximum limit of the “underlying” policy. For example, if your E&O policy (primary) covers $2.0 million per claim and you buy a $3.0 million excess policy, you now have $5M in total coverage. The excess policy only responds after the $2.0 million primary limit is exhausted.
Key Factors That Impact Limits and Pricing
- Type & Size of Business: Excess limits are priced based on a variety of factors including the type and size of the business, with revenues often used as the rating base. Larger businesses and those in high-risk industries (like technology, financial services, or healthcare) typically need higher limits. Smaller businesses may find that underwriters are sometimes reluctant to offer high limits. A contract requirement can mitigate underwriter reluctance.
- Pricing Factors: Premiums for higher limits or excess policies are not linear. The cost per million dollars of Cyber, E&O, D&O, & EPL coverage typically decreases as you move higher. However, there are some situations and lines of business where the cost per million of excess limit may actually increase as the attachment point moves up – typically because of increased uncertainty or risk.
- Minimum Premiums: Underwriters often set minimum premiums for higher limits, typically a rate per million of limit. If your underlying risk is low, you may pay a base rate (minimum premium) for access to additional capacity.
- Loss History: Recent or severe claims can make it harder to secure higher limits, or may result in higher excess pricing. Underwriters will scrutinize your loss history and risk management practices before agreeing to increased coverage.
- Underwriting Perspective: For small businesses, carriers may recommend against purchasing “too much” limit, as it can be disproportionate to the business’s actual risk and unnecessarily drive up costs. As noted, contract requirements may override this concern.
Contract Requirements: Clients and Vendors
Many client contracts specify minimum insurance limits for GL, Cyber, E&O, D&O, & EPL Insurance (see Navigating Contract Requirements for Cyber Insurance). Increasingly, vendors and suppliers are requiring evidence of robust insurance as a condition of doing business because a loss at a trading partner can impact their operations. Note that limit requirements vary considerably between organizations, and failing to meet these requirements can mean lost business or breach of contract. Let us know if you would like assistance negotiating limit requirements – we have some recommended tactics that are sometimes, not always, successful in reducing limit requirements.
Cyber Insurance: Security Controls
Cyber Insurance is unique. Underwriters focus on your cybersecurity controls such as MFA (multi-factor authentication), endpoint detection, and secure backups. Without these, higher limits may be unavailable or prohibitively expensive.
GL & Umbrella: Not a Substitute for Professional or Cyber Coverage
General Liability (GL) Insurance and Umbrella policies are valuable for bodily injury and property damage claims, but they do not cover professional liability (E&O), D&O, or most cyber risks. Umbrella policies also typically exclude cyber incidents, leaving a significant gap if you don’t have dedicated cyber insurance.
The Bottom Line
Increasing your insurance limits is a strategic decision that should be guided by your business’s size, industry, contract requirements, claims history, and risk appetite. Whether you choose to raise your current limits or add an excess policy, it is essential to work with a broker who understands the nuances of specialty coverages and can access a range of competitive options.
eSpecialty Insurance is your specialty insurance expert. We have developed a streamlined marketplace to provide multiple proposals from a range of competitive insurers, along with expertise to help you evaluate your exposures and choose the best combination of comprehensive coverage and price. We focus on E&O, Cyber, D&O, and EPL Insurance. Try our online Cyber Insurance Quoting Portal. We look forward to working with you.