All of us have heard the term "policy limits" when buying auto insurance or homeowners insurance, but most likely never gave it much thought. Simply put policy limits are when your insurance stops paying and you are liable for losses past the policy limits.
Say you have an auto insurance policy with $100 thousand liability insurance per person and $300,000 per accident. This means that if you injure an individual in an auto wreck and are sued successfully for $250 thousand you are on the hook for additional $150 thousand dollars.
The way to gain protection above your policy limits is to purchase an excess liability policy. These policies are often called "umbrella policies."
Buying Umbrella Insurance
Before you go purchasing an umbrella policy you must check on your auto policy and homeowners/renters/condo insurance policy. When you buy an umbrella policy you must have certain minimum liability coverage in those basic policies. Usually for auto insurance it is $100/$300 thousand.
Generally the least amount of coverage you can buy when purchasing an umbrella policy is $1 million, but many folks opt to extend their liability coverage for personal damage and injury to as high as $5 million. They do this because the additional coverage is very affordable.
Things to Do When Purchasing an Umbrella Policy
- Make sure the policy covers the cost of legal defense or negotiations in the event you are sued
- Exposure to slander and liable claims is greater in the age of the Internet, make sure this is a covered risk
- Before you buy get a sample policy and look over all the issues that are covered, even better, get two or three sample policies in order to compare coverage.
- Once you have decided on all the coverage you want get quotes from three insurance companies, you can do this online or through your broker if you have one.
Umbrella policies are not for the rich only. An accident or incident can endanger all your assets, including your home, your savings and if you are a business owner even your business. Coverage expense is very affordable and the peace of mind you have knowing you have protected yourself is well worth the cost.
The intent of personal liability insurance is to protect the insured from staggering financial jeopardy if involved in an event that causes damage to another’s property or bodily harm to others. It is also designed to protect business professionals from overwhelming financial exposure in the event of harm caused to others during the course of business.
Three Common Kinds of Protection Automobile Property and Liability Insurance
All car owners in 49 of the fifty states are required to carry minimum property and personal liability insurance. These are statutory minimal requirements. The amount of required coverage varies by state. Many motorists realize that the state mandated coverage does not offer enough protection to them and frequent by policies known as 100/100/300. This means that they are covered for $100 thousand dollars in property damage for an accident and also covered for $100 thousand per person for medical care per person per accident to a maximum of $300,000 per accident. These coverages also include protection in the case of a fatality.
Homeowners, Condo Owners and Renters Insurance
All of these policies provide coverage in the event of theft or fire in the insured homes. Most policies also include protection in the event someone suffers bodily injury while at your residence. Because this coverage is inexpensive most people who carry this kind of insurance have coverage for $100 thousand in medical payments or death benefits.
Professional Liability Insurance
In addition to professional liability insurance providing coverage for harm done to others by a business professional it also covers the legal expenses attendant to either defending the claim in court or negotiating a settlement.
However, all of the three kinds of policies are usually insufficient to protect high net worth individuals should they be involved in an incident that causes bodily harm or a fatality. Thus, their insurance advisors usually explain how important it is for them to acquire an "umbrella policy" to increase their protection against financial claims.
Personal umbrella liability insurance gives insureds additional liability coverage that covers any excess damage or injury that exceed your auto, home or professional liability insurance coverage. It is known as umbrella insurance, "additional personal" liability and "personal excess."
The more you have the more protection you need as your exposure increases in direct correlation with your wealth. It is best to discuss your personal liability coverage with your insurance advisor.