What is meant by "umbrella insurance"?

Umbrella insurance is designed to provide additional liability coverage that extends beyond the limits of existing policies, such as homeowners, auto, or boat insurance. This type of coverage is beneficial because it kicks in when the liability limits of the original policy have been reached, offering extra protection against significant claims or lawsuits.

For instance, if a person has a general liability policy with a limit of $300,000 and faces a lawsuit that results in a $500,000 claim, the umbrella insurance can cover the excess amount, ensuring that the policyholder is not left financially vulnerable. This is particularly important in situations where liability risks can be substantial, such as car accidents or injuries occurring on one's property.

The other options do not accurately describe umbrella insurance. Option A refers to coverage that is limited to a specific peril (fire), while option B focuses on theft and vandalism, which are typically covered under more specialized policies. Option D mentions a type of insurance defined by geography, which is not relevant to the comprehensive nature of umbrella coverage. Thus, the essence of umbrella insurance lies in its role as an additional safety net for liability, making option C the appropriate choice.