Umbrella Liability
Your auto and homeowner's or renter's policies will have a base amount of liability insurance included. Umbrella liability adds to that basic coverage with an additional pure liability amount.
You may need to increase the liability on your auto and homeowner's policies so they coordinate with your umbrella coverage. This will increase the cost of adding umbrella liability to your policies but can be necessary to ensure adequate coverage.
Why Bother?
Most home or auto policies have $300,000 or even $500,000 of liability coverage. If you're sued for an amount beyond that, your assets and future income could be fair game in a damages award. The chances of this happening are slim, but the result would be devastating. This is exactly the kind of risk you should transfer to an insurance company in the form of an umbrella liability policy. Why not pay a little money — $200 per year or so in most cases — for an additional $1 million of coverage?
How Much to Buy
Most people are fine with $1 million in umbrella liability coverage. But if your income is upward of $200,000 a year and you have assets over $1 million, you should consider $2 million in coverage or more.
Be sure the coverage includes your children's cars and apartments or make sure that they have coverage of their own. And double check your parents' coverage if they are still driving.
Do You Need Other Liability Coverage?
If you run a business or invest as a partner, sit on a board, participate in sports, or let your employees or household help use your car as part of their job, you should be aware of your liability. Check with your agent annually and outline with them all the areas you are involved in. There is often liability exposure you're unaware of.
