• Skip to primary navigation
  • Skip to main content
Good Financial Cents®
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
  • Make Money
    • Get Money Now
      • Ultimate Guide to Making Money
      • Need Money Now
      • Get Free Money Fast
      • Make Money Fast
      • Make $1K Per Month
    • Control Your Destiny
      • Self Employed Jobs
      • Make Money Online
      • Hobbies That Make Money
      • How to Become a Freelance Writer
      • Small Business Ideas to Start
      • How to Become an Independent Contractor
      • Best Online Jobs
    • Passive Income
      • Passive Income Ideas
      • Multiple Streams of Income
      • Extra Income
      • Residual Income Ideas
      • Learn to Sell e-Books
      • Make Money on Facebook
      • Make Money on Tiktok
      • Best Online Survey Sites to Make Money
    • Explore More
      • Make Money for Teens
      • Best Online Colleges
      • Best Jobs No College Degree
      • Become a Millionaire
      • Careers for the Future
  • Manage Money
    • Best Of
      • Budgeting Tools
      • Personal Finance Software
      • Best Cashback Cards
    • Company Reviews
      • Personal Capital vs Mint
      • Personal Capital Review
      • SmartAsset Review
    • Guides
      • Buy or Lease a Car
      • What is Liquid Net Worth?
      • Setting Financial Goals
      • How to Budget
      • Ways to Save Money
    • Explore More
      • How Much Car Can I Afford?
      • Best Auto Refinance Companies
  • Invest
    • Best Of
      • Best Low Risk Investments
      • Best Short Term Investments
      • Best Long Term Investments
      • Best Online Stock Brokers
      • Best Crypto Exchanges
    • Company Reviews
      • Lending Club
      • Robinhood
      • M1 Finance
      • Ally
      • TD Ameritrade
      • Fundrise
      • Betterment
      • Etrade
      • Wealthfront
    • Guides
      • Investing Small Amounts of Money
      • Investing in Real Estate
      • No Money Down Real Estate
      • Bonds vs Stocks
      • Peer to Peer Lending
      • Best Hedges Against Inflation
      • Safe Bitcoin Investing in 2022
    • Explore More
      • Bitcoin vs. Real Estate
      • Betterment vs Wealthfront
      • Investing for College Students
      • Stock Market Alternatives
    • By Investment Amount
      • How to Invest $100
      • How to Invest $1K
      • How to Invest $5K
      • How to Invest $10K
      • How to Invest $20K
      • How to Invest $50K
      • How to Invest $100K
      • How to Invest $200K
      • How to Invest $500K
      • How to Invest $1M
  • Taxes
    • Best Of
      • Best Tax Relief Companies
      • Best Tax Software
    • Guides
      • Federal Income Tax Guide 2022
      • Taxes and Cryptocurrency
      • How to Do Your Own Taxes
      • How to Invest Your Tax Refund
      • Hiring a Professional Tax Preparer
      • Tax Tips for Freelancers
    • Company Reviews
      • TurboTax Review
      • H&R Block Review
      • Taxslayer
      • Tax Act
  • Insurance
    • Best Of
      • Best Life Insurance
      • Best Home Insurance
      • Best Auto Insurance
      • Cheap Term Life Insurance
      • Car Insurance For Young Adults
    • Guides
      • Term vs Whole Life
      • Different Types of Car Insurance
      • Average Cost of Car Insurance
    • Explore More
      • Life Insurance Over 50
      • Life Insurance Over 80
      • $1 Million Life Insurance
      • $2 Million Life Insurance
      • $3 Million Life Insurance
    • Company Reviews
      • Banner Life Insurance
      • Ladder Life Insurance
      • Health IQ
      • Haven Life
      • Policygenius
      • State Farm Auto Insurance Review
  • Retirement
    • Roth IRA
      • Best Places to Open a Roth IRA
      • 7 Roth IRA Secrets
      • Roth IRA Conversion Guide
      • Roth IRA Rules
      • Roth IRA vs Roth 401k
      • Are Roth IRA Contributions Tax Deductible?
    • 401(k)
      • 401(k) Limits
      • 401(k) to Roth Rollover
      • Is 401(k) Enough for Retirement?
      • Maxed Out 401(k): What's next?
    • Traditional IRA
      • Traditional IRA Rules and Limits
      • Traditional IRA vs. 401(k)
      • Simple IRA Rules
      • SEP IRA Rules
      • How Much Do You Need to Start an IRA?
    • Explore More
      • SEP IRA vs. Roth IRA
      • 457 Plan for Successful Retirement
      • 401a Rollover Rules
      • How to Retire at 50
      • How to Retire at 55
  • Banking
    • Best Of
      • Best National Banks
      • Best High-Yield Savings Accounts
      • Best Checking Accounts
      • Best Savings Accounts
      • Best CD Rates
      • Best Money Market Accounts
    • Company Reviews
      • BBVA
      • Synchrony
      • Wells Fargo
    • Explore More
      • 9 Banking Alternatives for 2022
      • What is a Credit Union?
  • Home
    • Best Of
      • Best Mortgage Lenders
      • Best Mortgage Refinance Companies
      • Best Homeowners Insurance
      • Best VA Loans
      • Best Mortgage Rates
      • Best Moving Companies
      • Best Home Security
    • Guides
      • Home Buying Checklist
      • Online Home Appraisal
      • How Much House Can I Afford?
      • First-time Homebuyer Programs
      • How to Get Approved for a Home Loan
      • Save Money When Building a House
      • How to Save for a Downpayment
      • When to Refinance Your Mortgage
    • Explore More
      • 15 vs. 30-year Mortgage
      • Home Warranty vs. Home Insurance
      • Veterans United Home Loan Review
      • Quicken Loans Review
      • HELOC vs Second Mortgage
      • DCU Mortgage Review
      • Costco Mortgage Program Review
      • USAA Mortgage Loan Review
  • Credit
    • Best Of
      • Best Credit Repair Companies
      • Best ID Theft Protection Services
      • Best Credit Report Options
      • Best Bad Credit Loans
    • Guides
      • How to Build Your Credit Score
      • How to Raise Your Credit Score in 5 Months
      • How to Dispute Your Credit Report
      • Hot to Remove Collections from Your Credit Reports
      • How Identity Theft Destroys Your Credit Score
    • Explore More
      • What is a Good Credit Score?
      • What is a Bad Credit Score?
  • Debt
    • Best Of
      • Best Personal Loans
      • Best Student Loans
      • Best Student Loan Refinance
    • Guides
      • How to Get Out of Debt
      • How to Get a Personal Loan Approved
      • How to Pay Off Student Loans Faster
      • Should I Consolidate My Debts?
      • Should I File for Bankruptcy?
    • Company Reviews
      • Credible
      • Sofi
Advertiser Disclosure (How We Make Money)
GoodFinancialCents.com has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.

Do You Need Personal Liability Insurance Coverage?

Jeff Rose, CFP® | September 07, 2021

There’s nothing I like more than writing my annual checks for all my insurance protection…cough.

Not including my long-term disability policy, my $2.5 million 30 year term policy, standard homeowner’s and auto policies, and personal umbrella policy; I pay roughly $5,124 per year for my total business insurance coverage. But we all know that insurance is a necessary evil. When you damage someone else’s property or cause injury to someone else, you are usually held personally liable for the costs. This means that you have to pay restitution. In some cases, these costs can exceed your ability to pay. That is not a good situation! With the help of personal liability insurance, though, it is usually possible to meet these types of obligations. Personal liability insurance is a completely different ballgame from life insurance.

What is Personal Liability Coverage?

Chances are that you already have some liability coverage. Most homeowners policies and auto policies include a certain amount of personal liability coverage. If someone is injured at your home, or if you ruin someone’s property with your car, the insurance company pays the claims, up to the amount that you are covered for. Personal liability coverage helps you protect your assets since the insurance company pays out the claim, and you don’t have to dip into your savings, or into your other assets. However, the personal liability coverage that comes with your more common insurance coverage isn’t always enough.

Consider Umbrella Insurance

One way to augment your personal liability coverage is to purchase an umbrella policy. Umbrella insurance protects you in larger amounts than what is usually offered with your other policies, but the premium increase isn’t as bad. You can usually buy a popular umbrella coverage amount for about $150 a year, and an increase of $50 for each additional $1 million. Many consumers find that boosting the deductible on auto or home insurance can offset the cost of umbrella insurance. If you have factors that increase your chances of damaging property or injuring others, it can be worth it to get umbrella insurance — especially if you have a high net worth. Someone who knows you have more assets might be more willing to sue you for $2 million after a slip and fall at your home. Umbrella coverage kicks in after your regular insurance is tapped out. So, if your homeowner’s policy has $750,000 in liability coverage, and you have $3 million in umbrella insurance if you are sued for $2 million, your homeowner’s policy will be tapped first. Once the $750,000 has been paid out, the remaining $1.25 million will be paid from your umbrella policy. We initially started with a $1m umbrella policy but recently increased that to $2m of total coverage. I also have an umbrella policy for my business, too.

Errors and Omissions

When you are self-employed, you have to be aware of some of the liability issues that can come with your job. If a client holds you responsible for a service you provided, or if the promised results were not realized, or if you are considered liable for a service you didn’t provide, this can become an issue. Financial planners, lawyers, cosmetologists, and others who are in positions to provide advice and some services to clients can benefit from this type of liability insurance. This is my whopper of a premium, but with my profession; it’s a necessity. My total premium is $3,654 per year for E&O coverage…gulp. Some additional benefits that my E&O coverage policy covers on top of the $1m of coverage are:
  • Business travel Accidental Death Benefit: $25,000
  • Emergency Real Estate Consulting Fee: $25,000
  • Identity Theft Expense: $25,000
  • Key Individual Replacement Expense: $25,000
  • Kidnap Expense: $25,000
  • Theft of Work Materials: $2,500

Should You Buy Personal Liability Insurance?

Make sure you consider your situation and your position. If it appears that you could be sued for what you have done, it’s important to make sure that you have the proper liability insurance. That way, you will protect your assets, and avoid financial ruin if you are held liable for someone else’s injury, loss, or property damage. This post was featured in the Cavalcade of Risk blog carnival at Colorado Health Insurance Insider.
Facebook LinkedIn Twitter

About the Author

Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.

Facebook Twitter LinkedIn

You Might Also Enjoy

All the Types of Life Insurance Policies, Explained

All the Types of Life Insurance Policies, Explained

9 Best Life Insurance Companies - Updated May 2022

9 Best Life Insurance Companies - Updated May 2022

$2 Million Dollar Life Insurance: Is it worth it?

$2 Million Dollar Life Insurance: Is it worth it?

Life Insurance When You're Over 50

Life Insurance When You're Over 50

Life Insurance Over 80: Burial insurance riders

Life Insurance Over 80: Burial insurance riders

Best Extended Car Warranty for 2022

Best Extended Car Warranty for 2022

Reader Interactions

Comments

  1. cheryl says

    We live on 3 acres. We are the only ones living in our 40 yr old home. Planning on selling in two yrs. We have business ins.for 1-2 million as my husband is self employed. I would like to lessen some of our coverage as it has gone up quite a bit and we pay a separate flood policy. Our home is almost payed off and we are 55. I have never had a claim. And am trying to lessen my expenses, as we well know we will never get anywhere near what we are over insured for. Not sure what to do. I have been shopping around we never had any options to change our policy and company until this yr. These quotes are less than half of the 3500. We will now have to pay, for a little less coverage but alot not included like it is in our present policy. Its just becoming almost a mortgage payment to pay these premiums, and our house assessment is around 72k we could probably get 165-70k, but still like I said it is what it is you’ll get what your ins co thinks its worth in the end. Very unsure what I should do, from a realistic value stand point.

    Reply
  2. Mike Collins says

    Hi Jeff. A personal umbrella policy has been on my to do list for awhile now, I just need to consolidate my home and auto insurance under one carrier because that’s one of the requirements for the one I’m going to stay with.

    A business policy is also intriguing. What kind of insurance do you think bloggers should have to protect themselves against frivolous lawsuits? I’ve heard of bloggers being sued for libel and slander so you never know.

    Reply
  3. Mike says

    It’s a great pitch of personal liability insurance coverage. Professional liability resembles malpractice insurance, despite the fact that the insurance policy is probably not complete like another malpractice guidelines in diverse fields. This insurance is supposed to safeguard professionals or experts within their selected fields, who is probably not covered protection by general accountability due to their abilities. If a person is viewed to become professional, he/she’s put into a heightened standard and for that reason frequently thought to have better liability to his/her clients. Therefore, these professionals necessitate additional coverage than general accountability assurance can provide.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

  • Make Money
  • Manage Money
  • Invest
  • Taxes
  • Insurance
  • Retirement
  • Banking
  • Home
  • Credit
  • Debt
  • About
  • Contact
  • Do Not Sell My Personal Information
  • Facebook LinkedIn Twitter

© 2022 Good Financial Cents®. All Rights Reserved. | Privacy Policy | Disclaimer | Licenses & Disclosures

All written content on this site is for information purposes only. Opinions expressed herein are solely those of AWM, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.

All third party trademarks, including logos and icons, referenced in this website, are the property of their respective owners. Unless otherwise indicated, the use of third party trademarks herein does not imply or indicate any relationship, sponsorship, or endorsement between Good Financial Cents® and the owners of those trademarks. Any reference in this website to third party trademarks is to identify the corresponding third party goods and/or services.