Here's something most Texans don't realize until it's too late: one bad day can wipe out everything you've worked for. You rear-end someone at a red light, they suffer serious injuries, and suddenly you're facing a lawsuit for $2 million. Your auto insurance covers $300,000. What happens to the remaining $1.7 million? That comes out of your savings, your home equity, your investment accounts—everything you own.
That's where umbrella insurance comes in. It's extra liability coverage that kicks in when your home, auto, or other insurance policies max out. And in Texas right now, it's not just nice to have—it's becoming essential. Let's talk about why.
Why Texas Has Become a Lawsuit Hotspot
Texas isn't just big in size—it's leading the country in massive jury verdicts. In 2024, Texas topped the nation with 23 nuclear verdicts, which are jury awards exceeding $10 million. To put that in perspective, California came in second with just 17. Nationwide, nuclear verdicts jumped 52% in 2024, with total damages reaching $31.3 billion. The median nuclear verdict climbed to $44 million in 2023, more than double the $21 million low in 2020.
These aren't just corporate cases. Regular people are getting hit with jaw-dropping verdicts. The average personal injury verdict in Texas is $826,892, and while most cases settle for far less (the median is around $12,281), you don't get to choose whether you're the average or the outlier. One serious accident is all it takes.
Recent examples from Texas courtrooms tell the story: a workplace accident at a Frito-Lay warehouse resulted in a $72 million verdict in May 2024. An Oncor lineman case led to a $37.5 million award in April 2024. Even a 2023 revenge porn case resulted in a $1.2 billion judgment. These verdicts aren't slowing down, either—tort reform bills that might have limited excessive awards failed to pass the Texas Legislature in 2024.
The Gap Between Your Coverage and Real-World Risk
Most auto insurance policies in Texas carry liability limits of $100,000 per person and $300,000 per accident. Homeowners policies typically offer $300,000 to $500,000 in liability coverage. That sounds like a lot until you compare it to the current lawsuit environment. If you cause an accident that seriously injures multiple people, or if someone suffers a catastrophic injury on your property, you could easily face claims that blow past those limits.
Here's the scary part: when a judgment exceeds your insurance coverage, the plaintiff can come after your personal assets. In Texas, your primary residence and certain retirement accounts (like 401(k)s and up to $1 million in IRAs) receive some legal protection. But your savings accounts, investment portfolios, rental properties, and any IRA balances over $1 million? Fair game for creditors.
Umbrella insurance fills this gap by providing an additional layer of liability protection, typically starting at $1 million and available in increments up to $10 million. It covers you for incidents related to your car, home, boat, rental property, and even certain personal liability situations like defamation or false arrest. When your underlying policy limits are exhausted, your umbrella policy takes over.
What Umbrella Insurance Actually Costs (and Covers)
The best part about umbrella insurance? It's surprisingly affordable for what you get. In Texas, you can expect to pay between $150 and $400 per year for $1 million in coverage. That breaks down to roughly $12 to $33 per month for a million dollars of protection. Additional coverage blocks (each adding another $1 million) typically cost even less.
To qualify for umbrella coverage, insurers typically require you to carry certain minimum liability limits on your underlying policies—usually $250,000/$500,000 on your auto insurance and $300,000 on your homeowners insurance. You'll also need to purchase your umbrella policy from the same company that provides your underlying coverage, or at least have them coordinate.
Coverage typically includes bodily injury liability, property damage liability, personal liability (like slander or libel), landlord liability if you rent out property, and even legal defense costs. Some policies also extend coverage worldwide, protecting you during international travel. What it won't cover: intentional acts, business activities (you need commercial coverage for that), and damage to your own property.
How Much Coverage Do You Actually Need?
The standard rule of thumb is to carry enough umbrella coverage to protect your total net worth. Calculate your taxable assets: savings accounts, investment portfolios, rental properties, and any IRA balances over $1 million. Your employer retirement accounts and (in Texas) your primary residence generally don't need to factor in since they're protected from most creditors.
But here's the thing: even if you don't have millions in assets, umbrella insurance still makes sense. Why? Because courts can garnish your future wages if you can't pay a judgment. If you're early in your career with high earning potential, you're protecting not just what you have now, but what you'll earn over the next 20 or 30 years. A $1 million judgment at age 35 doesn't disappear just because you only have $50,000 in the bank today.
Consider increasing your coverage if you own a pool, trampoline, or aggressive-breed dog—all common lawsuit triggers. If you frequently host guests, employ household help, serve on nonprofit boards, or own rental property, you face higher liability exposure. And if you have teenage drivers (the highest-risk group for accidents), that alone is reason enough to bump up your coverage.
Getting Started with Umbrella Coverage
Start by contacting your current insurance company—the one that handles your auto and home policies. They'll review your existing coverage and let you know if you need to increase your underlying liability limits to qualify for an umbrella policy. This is usually straightforward and often just requires bumping up your auto liability from $100,000/$300,000 to $250,000/$500,000.
Get quotes for different coverage amounts—$1 million, $2 million, and $5 million—to see how the pricing scales. You'll often find that jumping from $1 million to $2 million costs significantly less than the initial $1 million, sometimes just $50 to $75 more per year. Given the verdict trends in Texas, many people are opting for at least $2 million in coverage.
The bottom line is this: Texas juries are awarding bigger verdicts than ever, and the trend isn't reversing. For less than a dollar a day, you can protect yourself from the kind of financial catastrophe that could derail your entire future. That's not fear-mongering—it's just math. Talk to your insurance agent today about adding umbrella coverage. Your future self will thank you.
