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 homeowners policy has $750,000 in liability coverage, and you have $3 million in umbrella insurance, if you are sued for $2 million, your homeowners policy will 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.
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.
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.
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.