Louisiana P&C Adjuster Practice Exam

What type of loss can an Umbrella policy cover that the base policy may not?

1. Losses resulting from fraud

2. Non-covered events under the primary policy

3. All property losses

4. Liabilities due to criminal actions

The correct answer is: Non-covered events under the primary policy

An Umbrella policy acts as an additional layer of liability protection that exceeds the limits of a primary insurance policy. It can provide coverage for specific non-covered events that are excluded from the base policy. This is particularly important for policyholders who may engage in activities or face liabilities that are not fully addressed by their standard insurance. For instance, if a homeowner's primary policy covers bodily injury or property damage up to a certain limit, but an incident occurs that exceeds that limit, the Umbrella policy can step in to cover the additional liability up to its own policy limit. Furthermore, Umbrella policies often cover certain umbrella risks, such as defamation or slander, which may not be included in standard liability policies. In contrast, losses resulting from fraud, all property losses, and liabilities due to criminal actions typically fall outside the scope of what an Umbrella policy is designed to cover. Specific exclusions in base policies remain when it comes to these types of risks or actions. Thus, the coverage for non-covered events under the primary policy is what makes this type of insurance especially valuable when facing unforeseen liabilities.