Personal liability


Personal liability insurance is often referred to as “umbrella insurance” because it is designed to provide insurance limits above what is covered by primary policies like auto or homeowners insurance. 

Most umbrella policies are designed to increase the liability limits for claims already covered by an underlying policy such as home or auto insurance. For instance, if your auto insurance policy provided $250,000 of liability coverage, a $1 million umbrella policy would increase your total car insurance coverage to $1.25 million.

$1.25 million may sound like a lot, but what happens if you drive a $25,000 vehicle and are at fault (and thus held legally responsible) for an accident that causes a $250,000 recreational vehicle towing a $50,000 Jeep Wrangler to roll over, totaling both? Your auto insurance policy may only cover part of the physical damage you’re responsible for, and that assumes every occupant escapes without a scratch.

You could be held personally responsible for the difference.

When to consider umbrella coverage

One key question to ask yourself is: “What do I have to lose?” A good place to start answer this question is with your net worth. How do you calculate it? Put a value on everything you own and subtract the amounts you owe on those things. What’s left over is your net worth.

Many experts agree that you should also include your annual income in this figure when determining the appropriate level of insurance.

Another way to look at it is, “If I’m responsible for a serious accident, would I like those who were injured or had damaged property be made whole?” For many (we wish everyone felt this way), the clear answer is “Yes!”

Consider this scenario in which an umbrella policy could help you protect your hard earned savings, your home, and perhaps your future income:

  • Your net worth is $200,000 (using the above calculation)

  • Your automobile liability insurance coverage is $100,000

  • Your driving age child is at fault in an accident that totals a $50,000 pickup and irreversibly injures the other driver’s right arm.

  • Do you think a judge or jury might agree that irreparable damage to someone’s right arm is worth more than the other $50,000 of coverage your policy includes?

  • Are you prepared to liquidate all your assets to pay what isn’t covered by your auto insurance?

When you consider that we live in a litigious society, medical bills are soaring, and the price of a single vehicle can easily exceed $75,000, a scenario like the one above seems less hypothetical and more real.

If your net worth exceeds the limits of liability on your primary insurance policies (auto and home insurance), the amount you own above those limits could be at risk.

The professional team at Comma Insurance can help you evaluate your risks and your options for protecting your hard-earned savings. We don’t work for insurance companies: we work for YOU, so you can count on us to shop around for the best prices and to give you all the information you need to make an informed decision.