If a homeowner's policy has liability limits of $100,000 and an umbrella policy of $1,000,000, and a $250,000 judgment is awarded, how much will the umbrella policy pay?

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Multiple Choice

If a homeowner's policy has liability limits of $100,000 and an umbrella policy of $1,000,000, and a $250,000 judgment is awarded, how much will the umbrella policy pay?

Explanation:
Umbrella liability coverage is excess coverage that starts paying only after the underlying policy has paid its limit. In this case, the homeowners policy can pay up to 100,000. A 250,000 judgment would be addressed first by that underlying policy for 100,000, and the remaining 150,000 would be paid by the umbrella policy, up to its 1,000,000 limit. So the umbrella policy pays 150,000.

Umbrella liability coverage is excess coverage that starts paying only after the underlying policy has paid its limit. In this case, the homeowners policy can pay up to 100,000. A 250,000 judgment would be addressed first by that underlying policy for 100,000, and the remaining 150,000 would be paid by the umbrella policy, up to its 1,000,000 limit. So the umbrella policy pays 150,000.

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