Final answer:
The claim that a personal umbrella policy replaces the liability coverage of automobile or homeowner's insurance is false. It serves as additional protection beyond the standard policy limits and covers certain claims not included in regular liability policies.
Step-by-step explanation:
The statement that a personal umbrella policy provides liability coverage to replace that which would normally be needed by an automobile or homeowner's policy is false. A personal umbrella policy is an extra layer of liability insurance that kicks in where your basic automobile or homeowner's policy limits end. Its purpose is to protect the insured from major claims and lawsuits, thus, protecting their assets and future.
Personal umbrella insurance provides coverage for claims that may be excluded by other liability policies including claims like false arrest, libel, slander, and liability coverage on rental units you own. In essence, it serves as an additional shield for unexpected risks that are not typically covered by standard policies.
It is important to recognize that although the umbrella policy extends the coverage limits, it does not replace the need for standard automobile or homeowner's insurance policies. Those base policies are still required to address regular claims and they usually provide the primary insurance coverage.