If there is ever a lawsuit against you for injury or death in your home, or you are found responsible for causing significant damage to someone else’s property, it is essential that you hold enough personal liability insurance. Provided you have appropriate coverage, you can help to eliminate expenses and protect your net worth.
How Much Liability Insurance Do You Need?
Proper financial planning starts with your liability coverage. The funds you have in the bank are not the only thing you are in danger of losing during a lawsuit – investments, the value of your property, and any other assets you may own are also at risk. For this reason, your liability insurance should cover most of, if not all of, your entire net worth. Anything less, and you’re leaving yourself open to pay whatever your insurance does not cover out of pocket, which could mean selling your property or having your wages seized.
How Much Does Liability Insurance Cost?
Liability coverage is also relatively inexpensive. Although liability insurance covers you for a lot, it does not cost a lot. In fact, liability insurance is very inexpensive in comparison to other types of coverage. For example, increasing the primary liability coverage on your homeowners policy from $300,000 to $500,000 might only cost an additional $20 a year.
To go along with that, an umbrella policy with $1 million in coverage for a family with one house and two cars might only cost about $250 to $350 per year.
Are You Covered For Liability?
Here are policies that provide your liability coverage:
- Auto insurance. You can never own too much liability insurance on your auto policy. An accident in your car that kills or seriously injures someone could result in a lawsuit of millions of dollars.
Homeowners insurance. This covers your personal liability on a world-wide basis against lawsuits for damaging property or injuring someone. Considering your home is most likely your largest asset, you limit should be at least as much as your home is worth.
- Renters Insurance. Are you out on your own for the first time? You may not think you need renters insurance but it’s the first step in proper financial planning for the rest of your life since it provides world-wide personal liability coverage. If you caused significant damage to the common areas of the building you were living in, could you handle paying those damages out of pocket? This will helps mitigate that.
- Umbrella Insurance. Simply put, if your insurance company does not have liability limits high enough on your home or auto policy, you should purchase an umbrella policy. This will give you additional liability above both your home and auto policies, and can typically provide very high limits.
If you currently hold less liability insurance than your net worth, are experiencing a major life change (such as purchasing a property or starting a family), or just want to check all your options, contact us at George A. Bell & Son.
We can give you the help and advice you need to keep your family safe from financial distress in the future.