What purpose does umbrella insurance serve beyond standard policies?

Umbrella insurance serves as an additional layer of protection beyond standard policies by covering specific losses that may be excluded by the underlying liability insurance. This type of insurance is designed to offer broader coverage and higher limits, protecting the policyholder from significant financial losses due to events that go beyond the scope of regular insurance policies.

For example, if an individual has a homeowners or auto insurance policy that includes liability coverage, there may be certain exclusions for specific incidents. An umbrella policy can cover those exclusions, offering financial protection in cases such as defamation claims or certain lawsuits that may not be fully covered by standard policies. This additional layer of coverage helps ensure that individuals are not left vulnerable to large financial liabilities, effectively bridging the gaps that might exist in their primary insurance.

The other options do not accurately capture the purpose of umbrella insurance. It does not cover all types of losses (as stated in the first option) and isn't limited to property damage (as noted in the third). Additionally, umbrella insurance does not act as primary insurance; rather, it supplements existing policies, which is why it plays a crucial role in comprehensive risk management for individuals and businesses.