The definition of an Umbrella Policy is “pure liability coverage over and above the coverage afforded by the regular policy, and is sold in increments of one million dollars. The term umbrella is used because it covers liability claims from all policies underneath it, such as auto and homeowners insurance policies.

For example, if you have an auto insurance policy with liability limits of $500,000 and a homeowner’s insurance policy with a limit of $300,000, then with a million dollar umbrella, your limits become in effect, $1,500,000 on an auto liability claim and $1,300,000 on a homeowner’s liability claim”.