Arkansas Insurance Adjuster Practice Exam

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Which statement BEST describes Umbrella coverage?

  1. Excess liability insurance that 'follows' the base insurance policy to the letter

  2. Excess liability insurance that can also provide additional coverages not provided by the base policy

  3. Excess liability insurance that 'follows' the base policy, but includes its own set of limitations and exclusions

  4. Insurance coverage that doesn't have deductibles

The correct answer is: Excess liability insurance that can also provide additional coverages not provided by the base policy

Umbrella coverage refers to excess liability insurance that goes beyond what is covered by a base insurance policy. This excess liability insurance can provide additional coverages that may not be included in the base policy, making option B the best description. Option A is incorrect because umbrella coverage is not limited to following the base policy's coverage exactly. Option C is incorrect because it states that umbrella coverage has its own set of limitations and exclusions, which is not true. And while option D may be true for some umbrella policies, it is not a defining characteristic of umbrella coverage.

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