When there is more than one insurance policy, how does the "excess" policy function?

The excess policy operates by providing additional coverage that comes into effect only after the limits of the primary insurance policy have been fully utilized. This means that the excess policy does not pay for any loss until the primary insurance has paid up to its coverage limit. This structure allows for layered coverage, where the primary policy handles initial costs, and if damages exceed that limit, the excess policy helps cover the remaining expenses.

This functioning is particularly important in protecting against large losses where a significant amount may exceed the basic limits of the primary insurance. By design, the excess policy is not intended to replace or negate the need for primary insurance; rather, it serves as an additional layer of financial protection.