What is umbrella insurance?

Umbrella insurance is designed to provide supplemental coverage that sits above the limits of the primary insurance policies held by an individual or business. This type of insurance serves as a safety net, offering additional liability protection beyond what standard policies, such as homeowners or auto insurance, may cover.

For instance, if someone is involved in a serious accident and the damages exceed their auto insurance liability limits, the umbrella policy can help cover the excess costs. It not only increases the total amount available for claims but also can provide coverage for scenarios that might not be included in the primary policy, such as certain types of lawsuits or claims.

This additional layer of coverage is especially crucial for individuals with substantial assets or those exposed to higher risks, as it helps safeguard against potentially devastating financial consequences from large claims or lawsuits. The other choices do not accurately describe the purpose of umbrella insurance; they either reflect basic coverage limits, address high-value assets specifically, or imply a requirement that is not applicable to all insured properties.