What does the term "umbrella insurance" refer to?

Umbrella insurance is a type of liability insurance that offers an added layer of protection beyond the limits provided by other standard insurance policies, such as homeowners, auto, or boat insurance. It is designed to cover significant liabilities that may exceed the coverage limits of your primary policies. For example, if someone were to sue you after a severe accident and the damages exceed the limits of your auto insurance, an umbrella policy would help cover the additional costs. This type of insurance is valuable for individuals seeking comprehensive liability protection, particularly in today’s litigious society where the risk of lawsuits can be significant.

The other options describe narrower categories or features of insurance that do not accurately capture the broader role of umbrella insurance. A refers to basic insurance policies without the added benefits of liability coverage, while C mistakenly limits coverage to only accidental damages rather than the broad spectrum of liability. D confines the insurance to business risks, whereas umbrella insurance is applicable to both personal and business contexts. Thus, the correct definition of umbrella insurance emphasizes its role in extending liability coverage beyond existing policy limits.