If you bought a $1 million personal umbrella insurance policy a few years ago, you probably felt completely secure. In California’s current economic and legal climate, however, that $1 million safety net is stretching incredibly thin.
What is an Umbrella Policy?
An umbrella policy provides excess liability coverage above your standard homeowners and auto insurance limits. If you are sued for a catastrophic auto accident or an injury on your property, the umbrella policy kicks in after your primary insurance is exhausted.
Why $1 Million is the New Bare Minimum
Several unique California factors have created a "perfect storm," making $1 million policies insufficient for the average homeowner:
- Social Inflation & "Nuclear Verdicts": California juries are increasingly awarding massive payouts for personal injury lawsuits. Settlements for severe auto accidents frequently cross the $2 million to $5 million mark.
- Skyrocketing Vehicle Values: Look around California highways—they are packed with Teslas, Rivians, and luxury SUVs. If you cause a multi-car accident involving high-end vehicles and medical injuries, property damage alone can eat up your primary auto limits instantly.
- Surging Real Estate Equity: If you own a home in Los Angeles, the Bay Area, or San Diego, your home equity has likely skyrocketed. In a lawsuit, your wages, savings, and home equity are all fair game.
How Much Umbrella Insurance Do You Need?
A good rule of thumb is to calculate your total net worth—including home equity, retirement accounts, and savings—and round up to the nearest million.
If you'd like to discuss whether or not increasing your limit is right for you, please reach out to us.
This blog post is not offered, and should not be relied on, as insurance advice. You should consult an insurance agent for advice in specific situations.