An umbrella insurance policy provides an additional layer of coverage above the coverage provided by an automobile insurance policy. An automobile insurance policy has three “pots” of coverage: (1) a per individual coverage limit for bodily injury or death; (2) a per accident coverage limit for bodily injury or death caused to more than one person; and (3) a per accident property damage coverage limit.
In the State of Texas all non-commercial drivers are required to carry a minimum of $30,000 per person for bodily injury, $60,000 per accident for bodily injury, and $25,000 per accident for property damage. See Texas Transportation Code Sec. 601.072. This is often referred to as a minimum limits policy, or a 30/60/25 policy. Anyone who has ever had any significant medical treatment will appreciate that $30,000 will not go very far given how expensive medical care is nowadays: you could easily spend twice that amount on a simple surgery for a broken wrist or arm.
Different insurance companies offer different policy limits that people can purchase, but the typical coverage increments aside from minimum limits are:
50,000/100,000/50,000
100,000/300,000/100,000
250,000/500,000/250,000
300,000/500,000/300,000
So someone with what would be considered a lot of car insurance may have up to $250,000 of coverage for bodily injury/death caused to one person. That sounds like a lot, and compared to what the average person carries it is a lot, but if the person insured under the policy causes a fatal accident or injures someone so severely they may not be able to work again, $250,000 is a drop in the ocean.
An umbrella policy typically provides an additional $1,000,000 of coverage above and beyond the coverage on an automobile policy. Relative to the cost of the primary automobile policy, umbrella policies are typically not too expensive. Depending on the demographics of the person buying the policy and their driving record, a $1MM umbrella may only cost a couple of hundred dollars for a year’s worth of coverage.
Having an umbrella policy will serve two important purposes: it will protect the assets and property of the person covered under the policy should they cause an accident resulting in very serious injury or death. It will also ensure that in the event of such an accident, the injured person or their family is more likely to be adequately compensated and the claim settled within the insurance policy limit.
