Senseless lawsuits and outlandish settlements got people’s blood boiling recently when a judge – yes, a judge – sued a little, family-owned dry cleaners for $65 million for misplacing a pair of his pants. Small businesses, this goes to show, are just as open to attack as their deep-pocket peers. A recent study by NERA Economic Consulting concluded that small businesses pay for 69 percent of civil lawsuit liability costs, even though they generate only about 19 percent of business profits.
You could still face significant loss of assets from damages and court costs in a liability claim even if you aren’t a small business owner or business executive. You can get protection from your renters, homeowners and auto insurance, but each policy has its restraints and your policies might leave you exposed where you least expect it.
Umbrella policies supply extra, overall coverage above these particular policies. Amounts commonly range from $1 million to $5 million and usually cover losses beyond what other policies are willing to pay. The coverage is not attached to your property or vehicle so it follows you wherever you go, but it typically doesn’t cover business actions, even if the business is at your home.
Your need for personal liability insurance depends on two things: the amount of property you have and the risks that go along with your lifestyle. Do you own a pool? Do allow hunting on your ranch or farm? Do have employees like a housekeeper or nanny that work in your home? These all expose you to certain risks beyond a typical homeowners policy.
Do other factors make you a bulls eye for lawsuits? Even trivial claims can cost you in time and perceptual distress. Any public knowledge about your assets, family inheritance, land holdings, winning the lottery or income – or even assumptions about these certain things – could bring out claims to more elaborate tricks.
Commonly, umbrella liability coverage extends to your spouse, your children and relatives that also live in your house, under your care or being cared for by someone living with you. That can be a comforting reassurance when you have teenagers driving or college students living away from home.
Umbrella liability insurance could protect money you have saved. Your financial counselor or insurance professional will be able to help you examine your coverages and potential risks to decide just big your umbrella should be.
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