What is one of the primary purposes of excess liability/umbrella policies?

The primary purpose of excess liability or umbrella policies is to provide broader coverage than existing underlying insurance. These policies are designed to extend the coverage limits of the underlying policies and fill in the gaps that may exist in those policies. They offer additional liability protection that goes beyond the standard limits of commercial general liability, auto liability, or other underlying coverages.

This broader coverage is crucial because it helps businesses manage their risk exposure better by ensuring that they have ample coverage in the event of substantial claims or losses that exceed the limits of their primary insurance. Umbrella policies often cover types of losses that may not be included in the underlying policies, thus providing additional peace of mind for the insured.

While the other options present relevant concepts, they do not encapsulate the core function of excess liability or umbrella policies as effectively. For instance, the idea of providing primary coverage or limiting coverage to specific incidents does not accurately reflect the overarching purpose of these policies, which is aimed at enhancing the breadth of coverage rather than narrowing it down. Similarly, setting premium rates for underlying policies is not a function of umbrella policies; rather, they may involve complex factors concerning both the primary and excess policies but do not serve to set those rates directly.