Personal Umbrella Policies:Not Just For Millionaires Anymore

Homes, Retirement Savings Can Be Protected at Low Cost

(Los Angeles, May 10, 2005) — The median home price in Southern California reached a record $439,000 in March, increasing many homeowners' net worth. Homeowners who want to more fully protect their assets from being used to pay off a lawsuit judgment or a high-cost claim should learn more about the additional safeguard offered by personal umbrella insurance policies, according to the Automobile Club of Southern California.

A personal umbrella policy is secondary coverage that generally takes effect after limits have been exceeded on a consumer's homeowner, auto or watercraft policy. In Southern California, the average cost of a competitively priced umbrella policy for one vehicle and one home will generally range between $200 and $300.

"Even with limits of half a million dollars for bodily injury on your auto policy or on your homeowner's policy, one tragedy could put your assets greatly at risk," said Jim Gilmartin, the Auto Club's senior vice president for insurance. "An accident that causes death or serious bodily injury can easily exhaust the limits of your auto, homeowners' or watercraft policy. You don't have to be wealthy to need an umbrella policy. If you have saved significantly for retirement or your home has greatly appreciated in value, those assets could need protection over and above your existing policy limits."

Some recent examples of civil lawsuit judgments that might have been covered by a personal umbrella policy include:

  • A $1 million verdict for back and shoulder injuries suffered during a boating accident;
  • A $2 million verdict against the family of an underage driver who drove a vehicle in excess of 80 miles per hour on the wrong side of the road, hitting another vehicle and killing the driver and three young passengers;
  • A $1.5 million verdict for back injuries sustained in a slip-and-fall accident in a residence.

"Million-dollar verdicts and lawsuit settlements are not unusual in our litigious society," Gilmartin said. "One lawsuit can devastate a family, especially those with moderate income who have no choice except selling their home to pay a judgment."

A personal umbrella policy generally must be purchased from the same insurer who provides your auto and homeowner policies, as well as your watercraft policy if you own a boat. Insurers require consumers to have certain minimum limits on their primary policies before they will issue an umbrella policy, Gilmartin said. For example, the Auto Club's affiliated Interinsurance Exchange requires its policyholders to have limits of $500,000 for bodily injury and $100,000 for property damage on auto policies, $500,000 for a homeowner's policy, and $500,000 for a watercraft policy. To be eligible for the Exchange's personal umbrella policy, a consumer must have all underlying coverages from the Exchange.

When consumers purchase their auto, homeowner, and watercraft policies from the same insurer, they may also benefit from a multi-policy discount that could significantly offset the additional cost of a personal umbrella policy, Gilmartin said.

The Automobile Club of Southern California, the largest affiliate of the AAA, has been serving members since 1900. Today, the Auto Club's members benefit by roadside assistance, insurance products and services, travel agency, financial products, automotive pricing, buying and financing programs, automotive testing and analysis, trip planning services, highway and transportation safety programs and legislative advocacy. Information about these products and services is available on the Auto Club's Web site at