My last article discussed homeowners insurance and the types of coverage that you should consider when protecting your house. Continuing that theme, this article will address some important items that were not covered including liability insurance, additional coverage for other losses, medical payments coverage, and finally umbrella policies.
Insurance can be a boring subject, BUT a very necessary one. If you do not have the proper insurance in place, all of our good planning and savings could come crashing down! Every July 1st, my own personal policy is up for renewal, and I use that time to look over the policy and see what type of coverage I have and what is needed. As always, I recommend that you talk to a professional agent for Property and Casualty Insurance to see what type of coverage you have and what is needed.
Personal liability coverage is a typical component of a homeowner’s insurance policy. While no one expects to be held liable after an accident at their home, liability coverage may help prevent you from paying out of pocket should the unexpected occur.
What would happen if someone were to take an unfortunate fall down your stairs? Ultimately, you could be held responsible for their medical expenses if you are found to be legally liable for the accident. The following are some examples of the ways in which the personal liability coverage in a homeowner’s insurance policy may help protect you.
Medical Bills - Liability coverage may help pay for medical bills that result from a visitor's injury at your home and help prevent you from paying those costs out of pocket. Even if that person has health benefits, you could be held responsible for the expenses if it's determined that the injury happened as a result of your negligence — like if you failed to fix a broken porch step, for example.
Pain and Suffering - Medical bills are one thing, but beyond that lies the possibility that you could be held responsible for any pain and suffering endured by a person who is injured in your home. If you're found legally responsible, liability coverage may help pay for the cost of a settlement against you.
Wages - If someone is injured while on your property and that injury results in their inability to return to work, you may be found legally liable for the wages they lose as a result. Liability coverage may help prevent you from paying out of pocket in a situation such as this.
Legal Costs - If you're sued following an accident in your home, you may need a lawyer. Liability coverage may help cover your legal expenses, regardless of whether you're found responsible for damages.
Personal Liability Coverage Away from Home - Liability coverage also may help cover damages that stem from accidents that happen when you're away from home. For instance, if you accidentally cause damage to your hotel's lobby, this coverage may help protect you if the hotel seeks reimbursement.
Speaking of which, personal liability coverage will only pay up to a set dollar limit. When choosing your homeowners insurance policy, keep in mind that if a liability judgment exceeds your coverage limit, you may be financially responsible for the difference. That’s where we recommend that you purchase a personal umbrella policy (which is optional coverage) that may help provide greater liability protection beyond the limits of a homeowner’s policy.
An umbrella policy provides additional coverage or “excess liability” above the limits of your basic policies. It can protect you from bodily injury liability claims and property damage liability claims. Umbrella policies also provide a broader form of coverage and can help cover legal fees, false arrest, libel, and slander.
Your car, house, investments, as well as your normal checking and savings accounts and even future income, are all considered assets. It is important to know that if you are sued for a lot of money and do not have enough liability insurance or an umbrella policy to cover those costs, allof your assets are exposed. Some retirement assets are protected under Connecticut law but asset protection of different assets can vary from state to state. People typically choose to buy an umbrella policy because they want to prevent the possibility of financial ruin due to one misstep or unforeseen accident. Umbrella insurance can provide the protection to prevent such an outcome.
Coverage for an umbrella policy typically starts in the range of $150-$300 for a $1 million policy. Your premium will increase if you decide to increase coverage. However, getting twice the amount of coverage and increasing the policy limit to $2 million will not usually double the cost of of your premium.
I know that there was quite a bit of information in this article, but please take the time to review your polices and/ or ask your agent to do so for you. Taking a shortcut on your premium is not always the best answer if you are reducing your coverage. Remember, the reason for insurance is to cover the unexpected - which if insufficient - can put your long term financial plan into jeopardy!
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