(MONEY Magazine) – -- Driving the family car home after drinking at a party, a Florida teenager crosses into oncoming traffic and slams into another car, seriously injuring all three of its passengers. One suffers permanent brain damage. The injured parties sue the teenager's parents. The insurance payout: $1.1 million. -- A fire breaks out in a hillside home in Southern California, and wind spreads the flames to three nearby houses. The neighbors sue, and split $692,000 in insurance money. -- A young man brings his date home for a late-night swim in the family pool. But the pool lights are out, and when she dives in, she hits bottom and breaks her neck. Now paralyzed, she is asking for $1 million in damages. As devastating as such accidents can be for the victims, they can be ruinous for those deemed legally liable. A lifetime of savings and investments can be / wiped out by a lawsuit. Moreover, if the judgment exceeds the value of your assets, the plaintiff can attach your wages for years to come. In all three cases above, however, the defendants could weather their legal losses because they own additional coverage in the form of an excess liability policy. Most major insurance companies charge between $100 and $200 a year, depending on where you live and how much property you are insuring, to put a $1 million umbrella -- the minimum -- over both your auto and homeowners liability coverage. It could be a bargain. In 1985, the last year for which complete figures are available, there were 488 jury awards at or above the $1 million mark, according to Jury Verdict Research in Solon, Ohio, a firm that monitors damage awards nationwide. And although many large awards are reversed or reduced on appeal, the '85 tally is still more than three times the number of seven- figure awards in 1980. Of course, even a settlement that falls shy of the million-dollar mark can easily breach the $100,000-to-$300,000 liability limit of a typical homeowners or car insurance policy. Robert Hunter, president of the National Insurance Consumer Organization, a nonprofit consumer watchdog group in Alexandria, Va., advises paying for an umbrella with your savings from accepting a higher deductible on your ordinary home and auto policies. Says he: ''The right reason to buy insurance is to protect against the one catastrophe that could wipe you out, not the sure- thing event, like a fender bender.'' In addition to more dollar coverage, an umbrella also protects you from a variety of transgressions not even mentioned in a standard auto or homeowners policy, including libel, slander and defamation of character. Most umbrella policies also pay all legal costs. By contrast, standard auto and homeowners policies do not cover legal expenses if the total cost of the case exceeds the amount of the coverage. Almost every major insurance company sells umbrella policies. But in some states a few underwriters, including State Farm and Allstate, write excess coverage only for clients who already have home and auto policies with the firm. Others have restrictions. For example, you may first have to purchase $500,000 in primary liability coverage, but that costs only about $20 a year more than a $300,000 policy.