What is the primary function of an umbrella policy?

The primary function of an umbrella policy is to provide supplemental coverage and fill gaps in liability protection that may exist in underlying insurance policies, such as homeowners or auto insurance. This type of policy offers additional liability coverage beyond the limits of those primary policies, helping to protect the insured from large claims or lawsuits that could exceed their existing coverage limits.

For instance, if an individual's homeowners policy covers $300,000 in liability but they are sued for $1 million due to an injury on their property, the umbrella policy would kick in to cover the remaining $700,000, thus safeguarding the insured's assets and providing peace of mind. This makes umbrella insurance a crucial component for individuals seeking to enhance their liability protection without replacing their standard policies.