What is an "umbrella policy" in insurance?

An umbrella policy is a type of liability insurance that offers coverage beyond what standard policies provide. This type of insurance is designed to protect individuals from significant financial losses by providing an extra layer of liability protection on top of underlying policies, such as homeowners or auto insurance. In the event that a claim exceeds the limits of those basic policies, the umbrella policy kicks in to cover the additional costs. This is particularly useful in scenarios involving serious accidents, lawsuits, or other situations where liability can quickly surpass regular coverage limits.

The other options do not accurately describe an umbrella policy. Life insurance typically focuses on providing financial support to beneficiaries upon the death of the insured individual. Health insurance is specifically tailored to cover medical expenses and does not fall under the umbrella of liability insurance. A policy that covers only property damage would not provide the broader liability protection that an umbrella policy offers, as it would be restricted to specific types of damage rather than broader financial liability concerns.