What triggers an umbrella policy to pay a claim?

Umbrella coverage activates when: (1) the underlying policy's limit has been fully paid out (the underlying limit is 'exhausted'); AND (2) the claim is within the scope of the umbrella policy's coverage. The umbrella then pays excess amounts up to its own limit. If the underlying policy doesn't cover the claim at all (e.g., business liability on a personal umbrella), the umbrella may still respond depending on its 'drop-down' provisions. Maintaining required underlying limits is essential — if underlying limits are below the umbrella's requirement, a gap can exist.