Louisiana P&C Adjuster Practice Exam

Which statement is true regarding the coverage of an Umbrella policy?

1. It inherently covers all risks without conditions

2. It extends only to the excess of underlying policies

3. It pays before any primary insurance takes effect

4. It can only be used for personal liability claims

The correct answer is: It extends only to the excess of underlying policies

The statement regarding the coverage of an Umbrella policy that is accurate is that it extends only to the excess of underlying policies. An Umbrella policy is designed to provide additional liability coverage beyond what is offered by your primary insurance policies, such as homeowners and auto insurance. This means it typically kicks in to cover claims that exceed the limits of those underlying policies, rather than functioning as the first line of defense in the event of a claim. An Umbrella policy does not cover all risks without conditions; it has specific exclusions and does not provide blanket coverage for all types of situations. It also does not pay before any primary insurance takes effect, as it serves as an additional layer of coverage rather than being the first to respond. Lastly, while Umbrella policies can cover personal liability claims, they are not limited solely to personal liability; they may also extend to certain types of commercial liability depending on the terms of the policy.