Definition - What does Umbrella Policy mean?
An umbrella policy is a form of liability insurance that provides extra liability coverage above the limits of the policyholder's home, auto, and watercraft policies. In this way, it protects against major liability claims that may exhaust the coverage limits of their regular policies as well as various legal and personal liability situations not covered by those policies.
Insuranceopedia explains Umbrella Policy
As expected, an umbrella policy provides liability coverage against bodily injury liability to other persons and damage to another person’s property. However, it also extends the typical liability coverage to rental units and being sued for slander, libel, false arrest, mental anguish, and other personal liability situations. This extra coverage most suits individuals who own many assets or very costly assets and face a high risk of being sued. The premium may be lower if the policyholder purchases it through the insurer who provided their original property insurance, but they must typically have a base coverage above a certain amount to qualify.