Remember the woman who spilled coffee on herself and sued McDonald’s because the coffee was too hot and she burned herself? She wound up getting some ridiculous amount of money as a settlement, and McDonald’s had to invest millions of dollar in revamping their coffee cups to add a phrase that informed consumers that their coffee was hot. Duh?! How many frivolous lawsuits have been filed since then? Too many to count for sure. This is one reason you should understand what personal liability insurance coverage is, and decide whether or not it’s something for you. So what’s liability insurance coverage?
What is personal liability insurance coverage?
Personal liability insurance coverage (also called umbrella insurance) is sort of like a backup form of insurance that is designed to pay out when a person’s homeowner’s, renter’s or auto insurance policy isn’t enough to cover a settlement. Say for instance someone slips on an oil spot in your driveway. Your homeowner’s insurance policy should take care of any monies you may be found liable to pay to that person. Now let’s say the amount you are obligated to pay is more than your homeowner’s coverage. This is when your personal liability insurance would kick in and make up the difference.
Should you have personal liability insurance coverage?
When trying to decide is you should have personal liability insurance coverage there are two things to consider. What are your assets and what are the risk factors in your life. Do you have a pool on your property? Do you host large events on your property? Do you provide daycare at your home? These are the sort of things that increase you risk of being sued, and if you own any type of business you could be the target of a lawsuit.
How much should you have?
This really depends on the amount of liability insurance you already have under your other policies. It’s worth mentioning, however, that because people are suing people left and right nowadays (and winning larger than life settlements) even if you have what you think is enough coverage, it may turn out to not be enough.
It should be noted that a personal liability insurance coverage policy is separate from other types of insurance policies, and therefore has a premium of its own.
Because it’s relatively inexpensive, having personal liability insurance coverage is probably a good thing. People get more sue happy with each passing year, and the courts seem to be accommodating one ridiculous lawsuit after another. So if you can afford it, why not have it?