An umbrella policy provides additional liability protection that is secondary coverage after your auto insurance liability is maxed on an auto claim or your home insurance liability is maxed out on a personal liability claim.  Sometimes I refer to umbrella policies as lawsuit protection.  This is because, if you’re ever sued for causing bodily injury or property damage to another individual (excluding in the course of your business), your personal umbrella policy could help you.  A typical auto insurance policy may have $100,000 or $250,000 in coverage for liability.  If you cause an auto accident and the medical bills, pain and suffering and lost wages exceed the limits you have on your auto policy, your umbrella will kick in.

The average vehicle liability award in 2014 was $444,020.  One in every five personal injury lawsuit awards exceeded $1,000,000 in the Southwest United States in both 2013 and 2014.  Without an umbrella policy, it’s very possible that an accident could ruin your life through seized assets and years of garnished wages

The amount of umbrella coverage you need comes down to your net worth and your income. The more net worth you have and the more income you’re able to generate, the more protection you need.  In Colorado assets exposed in the event of a judgement include, your primary residence (if it exceeds $75,000 in value), personal automobiles (if the value exceeds $5,000), cash on hand and money held in financial institutions, investments and personal property.  In addition to your assets, 25% of your future earnings are up for garnishment.  A calculation of your assets and future earning potential will determine the amount of coverage you will need.  Umbrellas start at $1,000,000 in coverage and go as high as $100 million.  You can expect to pay between $100 and $500 for a $1,000,000 umbrella, depending on your individual circumstances.