Personal Umbrella Liability Coverage

Property and Casualty

We buy insurance to transfer a financial risk we can't afford to cover on our own to a third party which can. We readily transfer the risk of a car accident or a home fire; and, although homeowners and auto insurance policies also provide personal liability coverage, most people drastically underestimate their personal liability risks. In addition, the claims associated with personal injuries occurring on one’s property can far exceed the repair and replacement claims made as a result of covered perils. The cost of a dog bite exceeded the $1 million mark in a recent claim.

Most people probably couldn't tell you what their liability limits are in their auto and homeowners insurance policies. But they could probably tell you at least one story involving someone they know or read about who just won a seven-figure settlement in a lawsuit over a mishap. What most people should know is that the liability limits on their existing policies wouldn't cover the average claim made by a seriously injured party. And, if the injury is shown to be a result of negligence on your part, the punitive damages can be devastating. That's where an umbrella insurance policy comes in.

There was a time when umbrella insurance was only purchased by high-net-worth people, primarily because they had more assets to protect. However, in these times of increased litigation and the high costs of advanced medical techniques, even middle-income earners need additional liability protection. Essentially, anyone with a home, a couple of cars, and some savings, are more vulnerable because they can least afford to have their assets attached.

You would know if you were a candidate for umbrella insurance once you add up the value of all your assets. Essentially, that is the amount that is vulnerable to liability claims. Once your assets are attached, then your wages are subject to garnishment. One liability claim can easily wipe out the wealth of most middle-income earners.

On average, for around a few hundred dollars a year, an umbrella insurance policy could protect you with $1 million of coverage. Generally, $1 million increments of additional coverage only marginally increase the premium amount. In terms of the amount of protection an umbrella insurance policy provides per premium dollar, it is by far and away the best deal in insurance coverage. And, considering you may be just one slippery banana peel away from a major lawsuit, it's a deal you shouldn't pass up.

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