What is 'excess coverage' in insurance?

Excess coverage refers to additional insurance that is purchased to provide coverage beyond the limits of a primary insurance policy. This type of coverage is essential for individuals or businesses that want to ensure they are fully protected in the event of a large claim that exceeds the limits of their basic policy.

For example, if a primary liability policy has a limit of $1 million and a claim is made for $1.5 million, the excess coverage would kick in to cover the additional $500,000. This is particularly important in fields where high-value claims are common, such as in professional liability or general liability situations.

The other options do not accurately define excess coverage. Coverage that applies only to big ticket items is too narrow and does not encompass the broader nature of excess insurance. Similarly, limiting insurance to business liabilities fails to address personal liability situations where excess coverage might be relevant. Finally, stating that coverage is only applicable after a financial audit misinterprets the nature of excess coverage, which is based on policy limits rather than financial audits. Thus, option B encapsulates the essence of excess coverage in insurance.