What is the primary purpose of "umbrella insurance"?

Umbrella insurance serves the primary purpose of providing additional liability coverage that extends beyond the limits of existing primary insurance policies, such as general liability, auto liability, or homeowners insurance. This type of coverage is crucial for protecting against large claims or lawsuits that could potentially exceed the coverage limits of primary policies.

For instance, if a business is faced with a lawsuit resulting in damages significantly higher than what its primary liability insurance can cover, umbrella insurance kicks in to cover the excess amount. This added layer of protection not only safeguards assets but also provides peace of mind, knowing that substantial liabilities are effectively managed.

The other options listed do not align with the primary function of umbrella insurance. While basic coverage at lower costs or covering losses from natural disasters may be features of different types of insurance policies, they do not represent the unique role that umbrella insurance plays in augmenting liability protection. Furthermore, replacing lost business equipment is typically the responsibility of property insurance, rather than liability coverage, which further distinguishes the purpose of umbrella insurance.