Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What is the primary benefit of having an Umbrella Policy?

1. It covers personal items

2. It provides coverage for unlisted risks

3. It adds extra coverage beyond standard limits

4. It eliminates the need for other policies

The correct answer is: It adds extra coverage beyond standard limits

The primary benefit of an Umbrella Policy is that it adds extra coverage beyond the standard limits of underlying policies, such as homeowners or auto insurance. This means that if you were to face a liability claim that exceeds the limits of your primary insurance, the Umbrella Policy kicks in to provide additional protection. This additional layer of coverage can help protect your assets in the event of large claims or lawsuits, ensuring that you are not financially vulnerable to high liability costs that could arise from unforeseen incidents. Considering other options: While some may think that the Umbrella Policy provides coverage for unlisted risks, it primarily extends coverage for existing risks rather than introducing new coverage for unique or unlisted conditions. The idea of covering personal items is typically more relevant to standard homeowners or renters insurance, which is not the main function of an Umbrella Policy. Lastly, an Umbrella Policy does not eliminate the need for other policies; instead, it complements them by providing additional protection on top of the existing coverage. Therefore, the correct choice of enhancing coverage beyond standard limits highlights the key advantage of an Umbrella Policy effectively.