Liability
Personal Liability.. What does it mean?
A type of insurance policy that provides excess coverage above and beyond the liability coverage amounts in a standard insurance policy. The umbrella policy provides extra protection in the event that a lawsuit exceeds the basic level of coverage in the standard policy
Investopedia explains 'Liability Insurance' Liability insurance is very important for those who may be held legally liable for the injuries of others, especially medical practitioners and business owners. A product manufacturer may purchase product liability insurance to cover them if a product is faulty and causes damage to the purchasers or any other third party. Business owners may purchase liability insurance that covers them if an employee is injured during business operations.
Umberella policies: A policy designed to provide protection against catastrophic losses. The umbrella policy serves two main purposes: it provides excess limits when the limits of the underlying liability policies are exhausted and it provides protection against some claims not covered by the underlying policy, subject to the assumption, by the named insured, of a self-insured retention
"One day while driving home from work, Ms. Smith crashed into the rear of a car on a slick highway. A woman and a child were critically injured and the child was paralyzed . After two years of litigation, Ms. Smith settled the lawsuit for more than $2 million. The client had $5 million in umbrella coverage. The policy paid for the settlement and all legal costs. “Without the umbrella,” Ms. Smith said, “they would have been completely wiped out.” " And now think of this scenario as if she didnt have umbrella, many individuals do not. So what would have happened then? The insurance company would have paid the liability that Ms. Smith carries on her policy to the injured party, which 60% of policy holders carry less than $100,000, and the remainder of that would have been billed to Ms. Smith! The court would hold Ms. Smith liable to pay the amount of $1,900,000.
It is so important to be properly protected because you never know what could happen!
Personal Umbrella insurance is additional liability insurance, designed to pay out on top of your existing auto and homeowner’s/renter’s insurance policies. For example, you may only have $300,000 in liability coverage on your car insurance. If you are hit with a claim of $1,000,000, you would be on the hook for $700,000 yourself unless you had an adequate umbrella insurance policy. Here is a diagram explaining this from MSN Money:
In addition, an umbrella policy can also “fill in the gaps” by providing coverage for other incidents like liability for rental properties or being sued for slander or libel. Imagine working and saving for decades, only to have all of it taken away with one incident.
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