What type of insurance would a homeowner purchase to secure higher limits of liability for their house and cars?

The correct answer is an umbrella policy, which is specifically designed to provide additional liability coverage beyond what standard homeowner's or auto insurance policies offer. Homeowners often face risks that could exceed their existing policy limits, and an umbrella policy acts as a safety net by kicking in when those limits are surpassed. This type of policy not only covers damages that you may be liable for in accidents involving your home or vehicles, but it can also extend coverage to situations such as libel, slander, or even accidents that occur outside of your home premises, offering a broader level of protection.

Additionally, while options such as a homeowner's policy (HO-3) do provide some levels of liability coverage, their limits may not be sufficient for more significant claims. Liability insurance generally refers to the basic coverage within homeowners’ or auto policies, rather than an extra layer of security. Property insurance covers physical damage to your home or belongings, not liability issues. Therefore, the umbrella policy is the most appropriate choice for a homeowner looking to enhance their liability protection.