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Home ownership has plenty of advantages—but when it comes to insurance coverage, there are also unique complications and risks. What happens when there is an accident at your home? If a serious injury occurs, can you afford to pay out of pocket?

Many insurance policies offer some level of personal liability insurance—but many homeowners often do not realize that they need personal umbrella coverage. Not addressing this could result in serious financial consequences. 

In the sections below, we’ll look at what could happen without personal liability umbrella insurance and outline the ins and outs of liability and umbrella coverage to help you choose the right policy for your financial needs.  

The Joneses: A look at life without a personal umbrella policy

Joe and Lynn Jones had amassed wealth through hard work: Joe, through his job as a software engineer and Lynn, a marketing consultant. They presented to the world a perfect picture of a successful family with five high-end cars, a custom home, a vacation cabin in the mountains, and four income-generating rental properties. Their three children attended a local private school with tuition costing them thousands of dollars a year.

Although Joe and Lynn were experts in their chosen fields, they had little knowledge on how to insure their assets, seeing insurance as a boring and complex topic. Fifteen years ago, as newlyweds, they placed their trust in a local agent who recommended a policy covering all their properties and autos. 

Like clockwork each year, the Joneses received a renewal offer, which they reviewed with a glance at the premium and to check if all cars and properties were insured. They didn’t discuss the policy coverage between themselves, or with their agent. Satisfied with their agent’s service, they didn’t see the need to do any more than pay the premiums on time. Oh, and they always received a nice birthday card each year from their agent.

Unfortunately for the Joneses, the perfect storm rolled in unannounced, ripping through their perfect lives. This storm didn’t arrive in the form of a natural disaster such as a wildfire, an earthquake, or a hurricane—instead, it came as a lawsuit against the Joneses from a terrible accident that happened at their home as they were celebrating their daughter’s birthday. 

At their backyard pool amid the festivities, two guests noticed a boy’s still body in the middle of the pool, the bright yellow snorkel bobbing on the water. Despite Joe’s frantic attempt to resuscitate him, the young guest died from drowning.

The boy’s parents sued for wrongful death, putting Joe and Lynn’s assets at risk. Their homeowners insurance covered them for only $500,000 per occurrence. Through their 15years of marriage, Joe and Lynn had accumulated $20 million net worth of assets—and this was the amount the claimants’ attorneys sued them for. 

As the claimants worked towards a settlement, the Joneses began liquidating their hard-earned assets to pay the settlement of $10 million. Their previous secure and abundant lifestyle drastically changed, and the early retirement they looked forward to had to be postponed.

If their insurance agent had recommended and placed an umbrella policy for the Joneses, they could have averted the situation, protecting their assets from any legal action.

Do I need personal liability insurance? 

You may ask, what is personal liability? 

Nationwide defines personal liability as an occurrence in the event an accident, in or out of your home, that results in bodily injury or property damage that you are held legally responsible for. Personal liability insurance is a key component of any homeowners or renters insurance policy. 

Your personal liability coverage may include: 

  • Personal injury
  • Defense costs 
  • No-fault medical payments
  • Damage caused to others by pets or other members of your household
  • Voluntary property damage
  • And more

Consider this everyday application: What if you and your child are playing baseball in a park, and the baseball smashes through a neighbor’s window—or even worse, hits and injures someone? Personal liability insurance will keep you covered for damages to property or individuals, even when you are outside of your home.

Standard liability, however, often caps out at $300,000. In the event of a serious accident, this is rarely enough to cover the long-term effects of an injury or a lawsuit, leaving many homeowners with a substantial bill for the rest.

And what is a personal umbrella policy? 

Travelers explains that personal umbrella coverage provides extra liability coverage that can help protect assets, such as your home, car, and boat. It also helps cover defense costs, attorney fees, and other charges associated with lawsuits.

Now, let’s take the example from above: You and your child are playing baseball in a park, and that ball hits someone in the head and injures them. Their injury prevents them from working for a period of time—or has caused permanent damage such that their profession is severely affected—and you are now responsible for long-term damages. If the injured party has a high-paying job (such as a doctor), the resulting lawsuit or monetary settlement could cause a serious financial strain.

Personal liability may not be enough to cover it, leaving you with out-of-pocket costs that could continue for years. This is where a personal umbrella policy kicks in and protects your assets.

For high-net-worth households, this coverage becomes increasingly important. In our first example of the Joneses, an umbrella policy would have amplified their personal liability policy, maximizing protection of their accumulated assets and their savings. 

The bigger question is: how much personal liability coverage do I need? 

According to Chubb, this is an individual decision based on a combination of factors. Essentially, the question is, “How much does the individual have to lose?” If a client is involved in a lawsuit, her or his entire net worth and even future earnings can be targeted. 

Chubb offers a free risk analysis tool to help you explore your own personal umbrella coverage needs—but ultimately, the best way to determine how much coverage you need is to speak with an insurance professional. 

See the difference: Personal liability insurance at DHW

At renewal, our personal lines department reaches out to review the limits on our clients’ policies. Two of the most important factors are the replacement cost of your home and the amount of liability limits one should carry. We use a 4-step process to evaluate and then recommend limit options. Steps include:

  1. Personal Net Worth (valued assets minus current liabilities)
  2. Determine risk (low, medium or high) and exposure of your assets and your annual activities
  3. Peer benchmark against “similar” households
  4. Cost for each layer of limit.

A little-known fact is personal umbrella coverage is affordable, costing less than $200 a year for $1 million limits. For high-net-worth households, personal liability umbrella insurance  is one of the best decisions you can make to protect your hard-earned assets. 

As shown from Joe’s and Lynn’s story, the prudent thing to do is evaluate what you need each year by consulting with a professional insurance broker who has the expertise to recommend and discuss with you what your actual needs are today and every year.
To learn more about personal liability coverage, we invite you to contact us. Let us put our Dedication, Heart, and Wisdom into helping you successfully protect your assets and your financial future.

Terry Stotka, CEO

What Do You Mean…I Needed “Umbrella Coverage”? What the Heck is That?


It’s our Dedication, Heart and Wisdom that we bring to every client relationship. We’re your partners in protection, prevention and risk management. In fact, we’re the last insurance brokerage you’ll ever need.

Talk to our insurance broker experts today to discuss how we can help you with your insurance needs. Please contact Terry Stotka at tstotka@dhw-ins.com or 925.922.2200.