Other Than Life (OTL) Agent’s Exam A Practice

Umbrella or excess liability insurance is designed to do what?

Replaces primary policies when limits are exhausted. Gives discounts on premiums. Covers nonliability losses. Provides extra liability limits once underlying policy limits are exhausted.

Correct Answer:

Provides extra liability limits once underlying policy limits are exhausted.

Explanation:

Umbrella or excess liability insurance is meant to add protection beyond what your underlying liability policies cover, kicking in only after those limits are exhausted. It acts as a safety net, providing additional liability limits so a big claim doesn’t threaten your assets. It doesn’t replace the primary policies when their limits are reached; the primary policies pay first, and the umbrella fills the gap. It also doesn’t offer premium discounts, and it generally covers liability risks rather than nonliability losses. In short, its main purpose is to provide extra liability limits once the underlying policy limits have been exhausted.

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