Personal Liability Insurance

Personal Liability Insurance

The Importance of Personal Liability Insurance

Personal liability insurance, also referred to as personal umbrella insurance, is another product we use to keep our assets in tact. Since we live in a litigious society, we believe that it’s a good strategy to have an insurance policy that can withstand a financial blunder caused by a lawsuit.

 

What is personal liability insurance?

Your homeowner’s and auto insurance policies have added liability protection within their contracts. If you are found negligent in a situation where someone was injured, your liability protection will pay for things like personal medical bills, rehabilitation, lost wages, etc.

However, the coverage amounts are relatively low and can be quickly exhausted depending on the severity of the other party’s injuries.

Protection from a personal liability umbrella insurance policy will trigger once the liability protection from your other policies are no longer sufficient. It gives you and your assets added protection.

 

How about an example of where this policy is important?

Let’s say Bill injures Anne in a car accident. Due to the severity of Anne’s injuries, she is now disabled and cannot return to work. Her medical bills are $50,000.

Good news and bad news. Good news: Bill’s auto insurance policy has liability coverage of $50,000. Bad news: Do you think Anne and her attorney will only go after $50,000?

Not likely. Remember…

    She can no longer work and provide for her family.

She can no longer fund her retirement.

She has ongoing medical bills she will have to pay because of her disability.

Along with financial hardship comes emotional distress.

So if you consider her lost wages for 20 years, medical bills, retirement, and personal therapy, you’re looking at the possibility of millions of dollars. If Bill doesn’t have personal liability insurance, then his assets are exposed.

So what does exposed mean? They could go after your house, cars, boat, bank accounts, 401k, etc. Any asset owned under your name is at risk.

But you don’t even have to be “physically” involved in the scene of the injury to be at risk. If someone gets injured at your home and you are held liable of the damages, then your assets are at risk if you don’t have sufficient coverage.

This article isn’t meant to scare you. It isn’t meant to invoke fear. We encourage you to take preventative measures. We want to inspire you to take action in protecting your wealth. Like putting on your seatbelt in a car, an umbrella policy is an additional layer of protection.

My wife and I have an umbrella policy that provides $5 million in excess, above the coverage that our home and auto policies provide. We only pay $531 a year for the policy. As you can see, the premiums are relatively low.

So, consider the benefits from these policies. Use an umbrella policy to cover your assets. Remember…sometimes when it rains, it pours.

 

Personal Liability Insurance

Personal liability insurance, also known as personal umbrella insurance, is a type of insurance coverage that provides an extra layer of protection beyond the limits of your existing insurance policies. It is designed to protect you financially in the event that you are found liable for causing injury to someone else or damaging their property.

While most individuals have various insurance policies in place, such as auto insurance or homeowners insurance, these policies typically have coverage limits. If you are found responsible for causing a significant accident or damage that exceeds the limits of your primary insurance, you could be held personally liable for the remaining costs. This is where personal liability insurance steps in.

Personal liability insurance provides additional coverage that kicks in after your primary insurance policy limits have been exhausted. It can cover a wide range of situations, including bodily injury, property damage, libel, slander, defamation, invasion of privacy, and even certain lawsuits arising from rental properties you own.

Here are some key points to understand about personal liability insurance:

  1. Coverage Limit: Personal liability insurance policies typically offer coverage limits ranging from $1 million to $5 million or more. This means that if you are held liable for damages or injuries and the costs exceed the limits of your primary insurance, your personal liability insurance will cover the remaining amount, up to the policy limit.
  2. Scope of Coverage: Personal liability insurance provides coverage for various situations where you could be held responsible for causing harm or damage to others. This includes accidents that occur on your property, such as slip-and-fall injuries, or incidents involving your pets. It also extends to situations outside your property, such as accidents caused by your actions while driving.
  3. Legal Defense Costs: Personal liability insurance not only covers the damages or settlements you may be required to pay but also includes coverage for legal defense costs. This can include attorney fees, court costs, and other related expenses incurred while defending yourself against a liability claim or lawsuit.
  4. Worldwide Coverage: Personal liability insurance often provides coverage worldwide, which means you are protected even when you travel internationally. This can be particularly valuable if you engage in activities or sports that may carry a higher risk of causing injury or property damage.
  5. Coverage Exclusions: Like any insurance policy, personal liability insurance has certain exclusions. Common exclusions include intentional acts, criminal activities, professional services (which may require separate professional liability insurance), and liabilities covered by other types of insurance policies. It’s important to review the policy carefully to understand what is covered and what is excluded.
  6. Cost and Policy Limits: The cost of personal liability insurance can vary depending on factors such as your location, the coverage limit you choose, your existing insurance policies, and your personal risk profile. Higher coverage limits will typically result in higher premiums. However, considering the potential financial risks associated with liability claims, the cost of personal liability insurance is often considered reasonable and well worth the investment.

It’s important to note that personal liability insurance is typically purchased as a separate policy and not as an extension of your existing insurance policies. It is generally recommended for individuals with significant assets to protect, as it provides an additional layer of financial security.

To obtain personal liability insurance, you can reach out to insurance providers or consult with an insurance agent who can guide you through the process and help you determine the appropriate coverage limits based on your needs.

In summary, personal liability insurance offers an extra layer of protection beyond your primary insurance policies. It helps safeguard your assets and provides financial coverage if you are held responsible for causing injury or property damage to others. Considering the potential financial risks involved in liability claims, personal liability insurance can be a valuable asset in protecting your financial well-being.

 

Insurance

Insurance is a way to protect against financial loss. It involves paying a premium to an insurance company in exchange for the promise of payment or reimbursement for certain losses or damages. Insurance can help individuals, businesses, and organizations manage risks and protect against unexpected events.

There are many different types of insurance available, including:

  1. Health Insurance: This type of insurance helps cover the cost of medical expenses, such as doctor visits, hospital stays, and prescription drugs.
  2. Life Insurance: Life insurance provides a lump-sum payment to the insured’s beneficiaries in the event of their death. It can help provide financial security for loved ones and cover expenses such as funeral costs and outstanding debts.
  3. Auto Insurance: Auto insurance provides coverage for damage or injury caused by a car accident. It can also provide coverage for theft, vandalism, and other incidents.
  4. Homeowners Insurance: This type of insurance helps protect homeowners against damage or loss to their property, as well as liability for injuries or damage caused to others on their property.
  5. Renters Insurance: Renters insurance provides coverage for personal property and liability for renters.
  6. Business Insurance: Business insurance provides coverage for various types of risks that businesses may face, such as liability, property damage, and employee injuries.

Insurance policies can vary widely in terms of coverage, exclusions, and premiums. It’s important to carefully review any insurance policy before purchasing it and to understand what is covered and what is not.

Insurance companies use various methods to assess risk and determine premiums, including actuarial science, statistical analysis, and underwriting. Factors such as age, health status, driving history, and location can all impact insurance premiums.

In conclusion, insurance is a way to protect against financial loss and manage risks. There are many different types of insurance available, including health insurance, life insurance, auto insurance, homeowners insurance, renters insurance, and business insurance.

It’s important to carefully review any insurance policy before purchasing it and to understand what is covered and what is not. Insurance companies use various methods to assess risk and determine premiums, and factors such as age, health status, driving history, and location can all impact insurance premiums.

 

Author: Mohammed A Bazzoun

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