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Navigating Coverages

How Much Coverage Do You Have – and Actually Need?

The Baldwin Group
Updated: April 23, 2024
3 minute read

Most auto and home policies have liability limits included but these do not always offer adequate coverage. When determining the most appropriate limits for your lifestyle, we recommend consulting your financial and insurance advisors. It’s important to consider your physical assets, invested assets, and future potential earnings as you determine the right limits for protection if you’re found negligent in a liability lawsuit.

To help protect you and your family from extraordinary financial loss resulting from an auto or property liability lawsuit, we recommend a personal umbrella policy. This policy is an additional layer of coverage that is activated once your home or auto liability limits have been exceeded and will pay up to a specified maximum amount.

How an umbrella policy works:

Your Auto policy:

Without umbrella insurance: has a $500,000 limit of liability insurance

With umbrella insurance: has a $500,000 limit of liability insurance, and your umbrella coverage has a $5,000,000 limit.

You run a red light and hit a bicyclist. The bicyclist is badly injured and seeks damages of $2,500,000. The court finds you liable for the full amount of $2,500,000.

Claim is paid:

Without umbrella insurance: After the $500,000 maximum limit on your auto policy coverage has been used, you are responsible for the remaining $2,000,000.

With umbrella insurance: After the $500,000 maximum limit on your auto policy coverage has been used, your umbrella policy covers the remaining $2,000,000 – leaving you responsible for $0.


Why we recommend an umbrella policy, by the numbers:

Liability claims

  • The average size verdict is up 967% from 2010-2018, and when children are involved, verdicts run almost 1700% higher.1 Successful individuals and families are especially vulnerable and viewed as having “deep pockets.”
  • Dog bites impact 4.5 million people annually, mostly children, and the average cost per claim is up 132% over the last decade due to increased medical costs.2 Policy holders should understand their policy, as many insurers have dog breed limitations and exclusions regarding dog bites and liability coverage.3
  • The average insurer payment per insured vehicle rose 31 percent for bodily injury claims.4
  • More people die from injuries sustained in a motor vehicle accident or slipping and falling than any other cause, including cancer and heart disease.

Litigation trends

  • Attorney representation now occurs earlier in the claims process for auto and liability claims.5
  • Social inflation is driving higher insurer claim payouts and forcing policyholders to pay higher premiums.
  • Insurance claims that went into litigation rose 47 percent from 2017 to 2021.
  • Legal system abuse is skyrocketing — investors have sunk more than $11 billion into third-party litigation funding aiming for a percentage of final nuclear verdicts.6
  • The average legal settlement amount has risen more than 65 percent from 2012 to 2022.7
  • The effects of ongoing nuclear verdicts may significantly increase insurance costs or make specific types of insurance so risky that insurers won’t underwrite policies.
  • With adequate protection under an umbrella policy, the insurance company pays for most attorney and litigation fees.

Auto accidents

  • Fatal auto accidents are on the rise after a four-decade downward trend.8
  • 62 percent of all crash fatalities in 2021 were vehicle passengers.9
  • In 2021, 65 percent of fatal accidents were caused by general distraction or daydreaming.10
  • Pedestrian deaths have risen 77 percent since 2010, the highest level in 40 years—and a 31 percent increase in daytime deaths.11

With increasing litigation and more settlements or verdicts reaching $10 million and higher, the benefits of investing in a personal umbrella insurance policy can pay dividends, protect your assets, and ensure future financial security.

Let’s talk about the guidance our private client team can provide.

1. American Transportation Research Institute, “Average Verdicts Greater than $1 Million,” July 10, 2020.

2. Insurance Information Institute, “Spotlight on Dog Bite Liability,” April 5, 2023.

3. Insurance Research Council (IRC), “Trends in Auto Insurance Claims,” February 2019.

4. Centers for Disease Control and Prevention, National Center for Injury Prevention, February 28, 2022.

5., Daily Business Review, “Insurance Litigation Spikes 47%,” July 8, 2022.

6. American Property Casualty Insurance Association, PropertyCasualty360, “Nuclear Verdicts Raise Alarm: Preventing Legal System Abuse,” July 11, 2023.

7. VerdictSearch, PropertyCasualty360, “They’re Just Killing Us,” April 25, 2023.

8. Insurance Institute for Highway Safety, IIHS, “Fatality Facts: Yearly Snapshot,” May 2023.

9. Insurance Institute for Highway Safety, IIHS, “Fatality Facts: Yearly Snapshot,” May 2023.

10. Insurance Institute for Highway Safety, IIHS, “Fatality Facts: Yearly Snapshot,” May 2023.11. Governors Highway Safety Patrol, “Pedestrian Fatalities by State,” 2022 Preliminary Data

Tags in this resource

excess liability nuclear verdicts personal liability social inflation umbrella insurance
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