Certified Meeting Professional (CMP) Practice Exam

What does an umbrella policy provide?

1. Comprehensive coverage for all event activities

2. Additional coverage to fill gaps in primary insurance

3. Direct reimbursement for lost goods

4. Cost reduction for non-profit organizations

The correct answer is: Additional coverage to fill gaps in primary insurance

An umbrella policy serves as a form of additional liability insurance that is designed to provide extra coverage beyond the limits of an insured's primary policies. It comes into play by covering gaps in primary insurance, which ensures that there are additional funds available in the event of a significant claim that exceeds the underlying coverage limits. This can be particularly valuable in scenarios involving events where liability claims might arise from various activities. In contrast, comprehensive coverage for all event activities would imply that every possible risk associated with the event is covered under one policy, which is not necessarily true when relying solely on an umbrella policy. Direct reimbursement for lost goods would be better suited to a specific type of property insurance rather than an umbrella policy, which generally focuses on liability. Similarly, the notion of cost reduction for non-profit organizations is not directly related to the fundamental purpose of an umbrella policy, as it doesn't inherently provide financial advantages or discounts but rather additional coverage options.