What is the purpose of an 'umbrella' or 'excess liability' policy?

UMBRELLA / EXCESS LIABILITY POLICY: Provides ADDITIONAL liability coverage ABOVE the limits of UNDERLYING policies. HOW IT WORKS: Sits on top of primary policies (personal: auto and homeowners; commercial: CGL, auto, employers' liability); when a liability claim exceeds the underlying policy's limit, the umbrella pays the excess up to its (often high) limit (e.g., $1M-$5M+); EXCESS vs UMBRELLA: 'Excess' typically just adds limits over a specific policy; 'UMBRELLA' adds limits over multiple policies AND may provide BROADER coverage (covering some claims the underlying policies exclude, subject to a self-insured retention for those); REQUIRES underlying coverage at specified minimum limits; PROTECTS against catastrophic claims/judgments that exceed primary limits (protecting the insured's assets); RELATIVELY INEXPENSIVE for the high limits provided; umbrella/excess liability is important casualty coverage — it protects against large liability claims exceeding primary limits and is commonly recommended for asset protection; a key exam concept.