In liability insurance terms, what is an umbrella policy?

• A. It is a policy that increases the underlying policy limits.
• B. It increases CGL limits beyond the underlying policy.
• C. It replaces the general liability policy.
• D. It covers only property damage.

Answer: (B)

Umbrella liability coverage sits above your existing policies and provides extra limits and sometimes broader protection. It doesn’t replace the underlying policies; it kicks in once those primary limits are reached (and can cover claims the underlying policies don’t fully cover). For a community association, this means higher overall protection for a wide range of liability claims—bodily injury, property damage, and related defense costs—up to the umbrella limit, beyond what your general liability and other primary policies provide. It’s common to require a minimum level of underlying coverage to be in place first.

This is why the correct description is that the umbrella policy increases liability limits beyond the underlying policy. It isn’t replacing the general liability policy, it isn’t limited to property damage alone, and it doesn’t simply raise the existing policy’s limits.