What type of insurance is an "umbrella policy" considered?

An umbrella policy is classified as a type of liability insurance that provides additional coverage above the standard policy limits of other insurance policies, such as homeowners, auto, or watercraft insurance. It serves as a safety net, offering extra protection against major claims and lawsuits, which might otherwise exhaust the limits of standard underlying policies.

For example, if a homeowner's policy provides $300,000 in liability coverage but a claim arises for $1,000,000, the umbrella policy can cover the additional $700,000. This additional layer of protection is particularly valuable for individuals with significant assets or public personas, as it mitigates the risk of financial loss due to unforeseen incidents.

The other options do not accurately describe the nature of an umbrella policy. For instance, health insurance serves a completely different purpose focused on medical expenses, while property-specific insurance would not encompass the broader liability coverage offered by an umbrella policy. An auto policy covering multiple vehicles pertains strictly to vehicle-related coverage and does not extend to general liability coverage beyond those vehicles.