What does excess (umbrella) coverage typically add to a policy?

Excess (umbrella) coverage serves to provide a substantial amount of additional liability protection beyond what is offered by the underlying primary insurance policies, such as homeowners, auto, or business liability policies. This type of coverage is designed to kick in when the limits of the underlying policies have been exhausted, thus giving policyholders a cushion against significant financial losses due to lawsuits, claims, or judgments that exceed those limits.

The reason why this type of coverage is typically characterized by a large amount of coverage is that it is intended for individuals or businesses that may face higher risks or potential liability exposure. For example, if someone's primary auto policy has a limit of $300,000, an umbrella policy can provide several million dollars of additional coverage, ensuring larger risks are adequately addressed.

The other options do not capture the essence of what excess coverage is designed to accomplish. Instead, they misrepresent the function of umbrella policies, which are focused on substantial financial protection rather than minimal amounts, standard deductibles, or premium reductions. Thus, the correct understanding is that excess coverage adds a large amount of coverage to an existing policy, reinforcing the financial safety net for the policyholder.