What is the main purpose of umbrella insurance?

Umbrella insurance serves primarily to provide additional liability coverage that extends beyond the limits of an insured person's primary liability policies, such as homeowners or auto insurance. It acts as an extra layer of protection against significant claims and lawsuits, ensuring that policyholders are financially safeguarded from the higher costs that can exceed their existing coverage limits.

For instance, if a policyholder faces a lawsuit resulting in a judgment that exceeds their auto or homeowners liability coverage, the umbrella policy can help cover the difference, thereby protecting the individual's personal assets from being seized or depleted to satisfy that judgment. This additional coverage is particularly valuable in instances where an individual may be exposed to high-risk situations, making it essential for those who want to safeguard their financial future.

Other options relate to areas that umbrella insurance does not cover directly. Health insurance is specifically designed for medical expenses, property damage typically falls under homeowners or auto policies, and high-value item insurance addresses specific coverage needs rather than the broader liability protection that an umbrella policy provides.