YOUR NEED FOR LIABILITY INSURANCE

You do not need to worry about liability insurance - your agent takes care of that. He or she is a nice person and explained your coverage five - or was it ten years ago? This is a seriously dangerous false sense of security!

Most Americans have heard of the multi-million dollar malpractice awards against doctors and other professionals, but physicians are not the only targets.

Reported less often is the fact that many people can be vulnerable to lawsuits on a level that can hit close to home. Million-dollar damage awards in cases of auto accidents or accidents that occur in private homes are no longer unusual.

Anyone with even a modest net worth runs the risk of suit in today’s “I’ll see you in court” society. As a result, most insurance experts advise boosting personal liability coverage limits to protect what you own.

Many courts - the judges and juries alike - are “result oriented.” If someone has suffered real damages, they take the position that “someone must make them whole.” That someone can very easily be you. Remember that all damages awarded in excess of your policy limits are your personal loss.

COVERAGE LIMITS

How much liability coverage is enough? Most insurance advisors agree that you need a lot more than you used to, and it is a very personal question. You should look at what you can afford to pay and what assets you want to protect. You should carry at least enough coverage to protect your total net worth.

Most individuals have some protection through homeowner (or renter) and auto insurance, but this basic coverage can fall far short of actual needs. Standard homeowner policies offer as little as $100,000 or $250,000 in personal liability coverage. Auto liability protection, even in states that require it, can be as low as $10,000 per person per accident, $20,000 for two or more people and $5,000 for property damage.

If you are particularly successful or visible in your community, you are more likely to be sued and more likely to be hit with higher damage awards. This “financial visibility” greatly increases your risk. Therefore, you may want to increase coverage to protect the value of major assets such as your home and investment portfolio.

Liability rates vary from state to state. It may be cheaper to increase coverage with a one million-dollar or larger umbrella policy than to significantly increase the limits on existing homeowner and auto policies. In most states, you can expect to pay from $90 to $200 a year for a $1,000,000 umbrella policy.

REDUCING PREMIUM IMPACT

One way to minimize the net cost of personal liability protection is to raise the deductible on your ordinary homeowner and auto insurance, then apply the savings to an umbrella liability policy. Raising a homeowner’s deductible from $250 to $500 should save about $50 to $60 a year, depending upon where the home is located. You might also increase your auto deductible to $250, or even $500. These steps might represent most of the cost of a $1,000,000 or $2,000,000 umbrella policy.

In your annual review with your general insurance agent, be sure to review all the vehicles you or your family drive, such as RV’s, boats, motorcycles, rental vehicles and even bicycles.

If you regularly drive a vehicle owned by someone else (an employer, institution, friend or child) review with your agent the coordination of coverage and whether or not your (higher limit) coverage will apply.

It is important to analyze what your personal risks will be and to what liabilities you and your family might be exposed. If you have a lot to lose, expanded liability insurance is a must.