Which statement is true regarding liability umbrella policies?

Liability umbrella policies serve a specific function in providing additional liability coverage that goes beyond the limits of primary insurance policies, such as homeowners and auto insurance. They are designed to offer supplemental coverage, meaning they kick in after the underlying policy's limits have been reached. This extra layer of protection is particularly useful for individuals who may face a claim that exceeds their standard coverage limits, offering peace of mind in the event of significant liabilities.

In contrast, the other statements do not accurately reflect the purpose and requirements of liability umbrella policies. They are not mandatory for homeowners, as this type of insurance is optional and often based on personal risk assessment. Umbrella policies do not provide primary coverage for all types of loss, as they specifically cover liability and generally are meant to supplement other insurances rather than replace them. Additionally, while umbrella policies enhance liability coverage, they do not replace the need for standard auto insurance, which is still required to address specific risks associated with operating a vehicle.