Personal liability

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

In some cases an umbrella insurance covers the exact same things as the underlying primary policy, but allows for increased liability limits. For instance, if your auto insurance policy provided $250,000 of liability coverage, a $1,000,000 umbrella policy would increase your total car insurance coverage to $1.25 million. $1.25 million sounds 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 totals a $750,000 recreational vehicle? Your auto insurance policy would only cover part of the damage to the RV, and without umbrella coverage, 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?” To answer this question you may have to calculate your net worth. It’s easy: put a value on everything you own and subtract the amounts you owe on those things. What’s left over is your net worth. 

Consider this scenario in which an umbrella policy could help you protect your net worth:

  • Your net worth is $200,000

  • Your automobile liability insurance coverage is $300,000

  • Your driving age child is at fault in an accident that results in $500,000 damages

  • The damages exceed your auto insurance limits and the court says you owe the other party $200,000

  • Would you be prepared to liquidate your assets to pay the $200,000 of damages not 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 claims 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.