In personal insurance, what is used to cover additional liabilities over basic policy limits?

An umbrella policy is designed specifically to provide coverage for additional liabilities that exceed the limits of basic liability policies. This type of insurance acts as a supplemental form of protection, extending coverage across various aspects, such as personal injury, property damage, and certain types of lawsuits.

The importance of an umbrella policy lies in its ability to enhance overall coverage, providing a safety net for individuals who may face substantial claims that could otherwise exceed their primary policy limits. It generally offers higher limits at a relatively low cost compared to increasing the limits on existing policies.

In contrast, subrogation refers to the process where an insurance company seeks reimbursement from a third party responsible for a loss after it has compensated the insured. Excess coverage, while similar in concept, typically applies to specific policies and may have different conditions than those of an umbrella policy. Basic liability covers standard risks but does not extend its limits, which is why an umbrella policy is often the favorable choice for comprehensive protection.