Protect Your Assets with a Personal Umbrella Policy

Protect Your Assets with a Personal Umbrella PolicyBy Richard A. McGrath, CIC, LIA

The liability coverage you have for your home or auto will protect you against a minor mishap, but will it hold up against a catastrophic loss? Odds are not. In today’s society, lawsuits are occurring with alarming frequency, sometimes resulting in verdicts that run into hundreds of thousands or even millions of dollars. Without adequate protection, your current assets could be put at serious risk.

If a judgment or settlement exceeds your policy limits, you will be legally responsible for paying the excess amount for which you are liable. A personal umbrella policy could protect you against excess liability judgments for loss, injury, or even death caused by negligent acts. In other words, an umbrella policy provides you with protection that goes above and beyond your primary policy limits.

For example, one evening a 17-year-old takes his parent’s car out for a drive. He crosses over the median and collides head-on with another vehicle. Two passengers in the other car are killed, and a third is seriously injured. The 17-year-old driver is found negligent and ordered to pay $1.5 million to settle the injury claims.

The parents have an auto policy with a $300,000 per claim liability limit. Fortunately, the parents also carry a personal umbrella policy. The auto policy will pay $300,000, and the umbrella will pay the remaining $1.2 million. Without this added protection, the family would be responsible for paying the excess amount of $1.2 million entirely out of pocket.

How well protected are you and your family from paying a large liability loss? Consider the following real-life examples taken from Jury Verdicts Research, an LRP Publication Company:

  • While playing with BB guns, a boy was shot by another boy at a friend’s home. Plaintiff Verdict, Compensatory Award: $500,000
  • A 12-year-old boy suffered lacerations to his lower legs and thigh when he walked by a neighbor’s house and was bitten by her two dogs. Plaintiff Verdict, Compensatory Award: $500,000
  • A man improperly installed a pool diving board at his former home that later resulted in a serious injury to the home’s new owner. Out-of-court Settlement: $2,500,000
  • A 6-year-old boy suffered partial permanent impairment of one arm and hand while playing in a friend’s yard and being lifted over a fence to retrieve a ball. Compensatory Award: $1,220,000 (later settled)
  • A driver was rear-ended by an uninsured motorist, which forced the driver’s car into another vehicle and caused injuries to the occupant of the front vehicle. Out-of-court Settlement: $1,250,000
  • A teenage driver hit a parked truck, causing his passengers to suffer serious head injuries. Out-of-court Settlement: $1,875,000

Added Protection, Affordable Solution

Everyone has something to lose, which is why umbrella policies aren’t just for the wealthy anymore. In fact, with increasing settlement awards, it’s more important than ever that an average consumer has coverage that protects their personal assets.

If you are sued for a large sum of money and don’t have enough liability insurance or an umbrella policy to cover those costs, all of your assets become exposed. This includes your home, car, investments and retirement accounts, checking and savings accounts, even your future earnings.

A personal umbrella offers added protection at an affordable cost. For about $150 to $300 per year, you can buy a $1 million umbrella to start. You can choose to increase this coverage in increments of up to $5 million for an additional cost. Keep in mind that there are certain limits that must be met in order to purchase umbrella coverage: $250,000 per person/$500,000 per accident of liability insurance on your auto policy and $300,000 of liability insurance on your homeowner’s policy.

Besides providing increased liability limits for claims of bodily injury, personal injury, or property damage, a typical personal umbrella gives you additional benefits:

  • Protection against claims that may not be covered by your underlying policies for homeowner’s, auto liability and watercraft liability.
  • Protection for a covered loss that takes place anywhere in the world.
  • Coverage for defense costs and attorneys’ fees associated with claims against you that are covered by your personal umbrella policy but not by your primary policies. These expenses are paid in addition to your policy limit.

Who Should Buy An Umbrella?

Anyone with assets or a high net worth to protect should buy a personal umbrella policy. Additionally, everyone who drives a vehicle (car, motorcycle, boat, ATV, etc.), everyone who owns or rents a home, and everyone with children, dogs, a swimming pool or trampoline will benefit from buying a personal umbrella policy.

Expect the unexpected. This is a saying that rings true in life, but especially in the insurance industry. A personal umbrella policy can protect you from certain unexpected events that have the potential to jeopardize your financial security. Talk with your independent agent today to determine your specific risk factors and what you can do to protect your current and future assets.


Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group of Sturbridge, Mass. He can be reached at 508-347-6850 or at rmcgrath@mcgrathinsurance.com.

This article is written for informational purposes only and should not be construed as providing legal advice.

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