Buying Umbrella Liability Insurance
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If you own a car or a home, of course, your homeowners and auto policies provide some liability coverage –typically $100,000 to $300,000 for your homeowners policy and about $50,000 for your auto policy. (Renters insurance policies provide some liability coverage, too.) But if you can afford it, you ought to buy additional liability coverage –known as umbrella liability insurance –from a homeowners or auto insurance agent. After all if, say, you or a member of your household cripples a bigwig executive by plowing into him on a ski slope, you could be the target of a massive lawsuit that far exceeds those limits. Or if your teenager throws a party in your basement while you’re away and a friend breaks a leg on the stairs, you could be held responsible and your liability could be enormous.
An umbrella liability policy covers many claims that come because you or members of your household have damaged others out of negligence –or libeled, slandered, or defamed them –in excess of the limits on your other policies. Buying such insurance is especially important if you fit one or more of the following profiles:
• You have substantial assets and are thus a prime target for a big lawsuit.
• You employ hired help who are not licensed or bonded, such as a cleaning woman, baby-sitter, or gardener.
• You often have people house-sit for you.
• You rent out a room in your house.
• You have a home-based business.
To be safe, if you have as little as $200,000 in assets, it’s wise to purchase a total of $1 million in liability coverage (the minimum for umbrella policies.) If you have, say, $500,000 in assets, you’re better off with the $2 million or more. The cost of the coverage depends on where you live and how many cars, boats, and homes you own. Generally, a $1 million policy might cost $150 to $200 a year. The next million dollars would cost an added $75 annually; you’ll pay about $50 for every million thereafter. (Umbrella liability coverage on a home-based business will cost about $30 extra a year.)
To shave the cost of an umbrella liability policy, see about raising your liability coverage to the highest allowable levels on your homeowners and auto insurance policies. Then buy an umbrella policy for just the remainder you’d like covered. Also, look into buying your umbrella policy from the same insurer that provides your auto and/or homeowners coverage. In return for all this business, many companies will knock about 15% off your umbrella policy premium.
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One Response to “Buying Umbrella Liability Insurance”
I have only one comment… thank god I don’t live in the “land of the free”
By
Don (Who am I?) on Aug 21, 2008