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Insurance · Umbrella and Excess

What is the primary purpose of a personal umbrella policy?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

To provide excess liability coverage above the limits of underlying policies (auto, homeowners) — kicking in after underlying limits are exhausted

  1. A To replace homeowners insurance
  2. B To provide excess liability coverage above the limits of underlying policies (auto, homeowners) — kicking in after underlying limits are exhausted
  3. C To cover losses excluded by all other policies
  4. D To cover business liability

Why this is the answer

A personal umbrella policy provides excess liability coverage above the primary policies' limits. It activates when an underlying policy limit is exhausted by a covered claim. It also broadens coverage in some areas not covered by underlying policies. Example: if auto liability pays $300,000 (its limit) on a $1,200,000 judgment, the umbrella pays the additional $900,000 (up to the umbrella limit). Umbrella policies require maintaining specified minimum underlying limits to activate.
Source: P&C Exam, Personal Umbrella

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About this topic: Umbrella and Excess

Umbrella and excess liability questions cover how these policies sit above underlying coverage, retained limits, drop-down coverage and the requirement to maintain underlying limits. This is one of 5 Casualty Insurance questions on umbrella and excess, each with a full explanation on a single study page.

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