or Umbrella insurance refers to additional limits of (usually) liability
insurance placed over a basic "Primary" or "Underlying"
policy, usually in increments of $1 Million. (This is usually much
more cost-effective than trying to raise the limit on a $1 Million
policy to higher levels, due to a number of very boring underwriter
concerns.) A $1 Million primary or basic policy plus a $1
Million excess or umbrella policy effectively produces a total $2
Million insurance limit.
term "Umbrella" is still in use and originally was a sort
of descriptive term for a much broader policy which would, subject
to a deductible (retention) cover losses which the primary or basic
policy did not cover. This was a big selling point & umbrella
insurers began to find themselves saddled with claims for which
there was no responsive first-dollar insurance. Those claims led
most underwriters to apply new exclusions essentially parroting
what was on the primary policies they were written over. The net
result is that policies still referred to as "Umbrellas"
are laden with so many common exclusions that the insurance they
provide is often not much different from the primary policies they're
written over, and serve only to provide additional amounts of insurance,
rather than a true "Umbrella" feature.