Insurance protects us against the unexpected. With many types of insurance, the potential loss can be measured. Auto collision and comprehensive coverage insure the actual cash value of your vehicle. The possible loss is finite, limited by the value of the vehicle. Coverage A on a homeowner insurance policy insures the rebuild value of your home. Again, the potential loss is limited and can be measured. Liability insurance, however, can range from small claims up into the millions. This unpredictability and the fact that anyone can experience a loss make it important to have a closer look at liability insurance when choosing the best ways to protect your household.
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If our actions (or inactions) cause a financial loss to others, we can be held liable to pay for those losses. Liability insurance can help mitigate the risks involved, but you will need the right types of coverage in order to protect your household against certain risks.
Home insurance personal liability
Most homeowners and renters insurance policies include liability insurance. Common claims that fall under this coverage type include slip and fall accidents, dog bites or unintentional damage to the property of others.
Base coverage often ranges from $100,000 to $300,000. But for many households, a higher coverage limit offers a better protection. Liability is not limited by your assets. If a court awards a judgement for an amount that is higher than your coverage limit, you may be forced to tap into your savings, sell assets or even pay from future earnings over time. Without sufficient coverage, an innocent accident could change your financial future forever.
Ask your broker about your coverage options.
Auto insurance liability coverage
Auto insurance policies provide a separate type of liability coverage that only applies to auto accidents. Again, the potential losses can be large if someone else is injured. In some jurisdictions, the minimum required coverage is as low as $5,000 for property damage liability and $15,000 for bodily injury liability. Rather than choosing the minimum amount allowed by law, take a moment to consider your potential loss. Remember, liability judgments are not limited by the amount of money you have, meaning that a liability judgment become an ongoing financial burden if you do not have enough coverage.
Personal umbrella policies
An umbrella policy extends the coverage of underlying policies. For example, an umbrella policy can be used in combination with the liability insurance on your homeowner insurance policy and the auto liability coverage from your auto policy. Most insurers require the underlying policies to carry a minimum limit of coverage. The umbrella policy increases the underlying coverage if a claim exceeds the limits of the underlying policies. In some cases, umbrella policies also introduce new coverages, such as liability coverage for libel or slander.
Excess liability policies
For some households, an excess liability policy may be a preferred solution to an umbrella policy. Excess liability policies often offer higher available coverage limits but do not add new coverages.
Professional liability insurance
A professional liability insurance policy is a crossover between business insurance and personal insurance because you can purchase professional liability insurance even if you do not have an incorporated business. People who offer professional services or offer advice professionally should consider this coverage which is also known as errors and omissions insurance. Professional liability risks are not covered by a standard homeowner insurance policy.
Specialty liability insurance
Insurance policies generally cover very specific risks, which mean that some activities may fall outside the coverage that is offered by standard policies. Some examples might include liability related to boating, flying planes and other types of aircraft or liability related to horse riding. A specialized policy can provide better protection.
The best way to protect your assets and future earnings is to have a candid conversation with your broker, discussing all the activities that you or family members engage in to better understand your potential exposure and to craft a customized solution. Just reach out to your broker today to get started.