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Other Articles
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Property and Liability Insurance
Coverage Above and Beyond
By Rick Willoughby
Senior Financial Consultant & AAMS, Symphony Financial Services
It's almost a given that people who own a house or a car have some liability insurance. But would your current insurance coverage be enough to shield your assets from a million-dollar judgment? The number of million-dollar jury verdicts is on the rise. The latest figures showed a 13 percent increase between 1997 and 2003.¹
An umbrella liability insurance policy can help protect your family residence, future income, and even retirement assets or education funds in the event that you are faced with a large judgment.
Pool, Pooch, and Porsche
Is there a swimming pool or trampoline in your backyard? Do you have teenagers who drive? Do you entertain frequently or own a dog? Does your lifestyle communicate to others that you might have significant assets? These are some indications that you might be a good candidate for an umbrella policy.
Umbrella liability insurance works as a backup policy if the limits of your primary insurance coverage are ever exhausted. The issuing company typically will require you to purchase the maximum coverage available on your home and auto policies, which serve as a type of deductible for the umbrella policy. If a claim or judgment against you ever exceeds the limits on the underlying policies, the umbrella policy would pay the difference, up to the policy limit.
Many insurance companies offer umbrella policies in $1 million increments, and a few companies offer up to $100 million coverage for high-net-worth individuals. Most people can expect to pay a few hundred dollars a year for a $1 million policy.² The appropriate amount of coverage for your situation will depend on personal factors.
If someone were injured on your property or by your vehicle and your financial responsibility exceeded your insurance coverage, it would be disastrous to have to sell your home or use a portion of your future earnings to pay the balance. By putting an umbrella policy in place, you may be able to avoid dipping into your personal assets to pay a large judgment.
1-2 The Baltimore Sun, April 24, 2005 (most recent figures available)
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