If you’re hit with a lawsuit, your auto or homeowners insurance may not fully cover you.
Quick quiz: Do you own a dog? How about a swimming pool or trampoline? Do you have a long commute? Are you a hunter? If you answered yes to any of those questions, you have an above-average chance of being sued. You are also more vulnerable if you have teen drivers at home, own more than one residence, employ domestic workers, entertain frequently, are active on social media, coach a youth sports team or serve on a nonprofit board.
Even if you don’t have above-average risk, if you’re sued and found at fault for personal injury to others, your homeowners and auto insurance may not fully cover your liability. In 2016, half of personal injury liability awards and settlements were $100,000 or more; some 19% were $1 million or more, according to the latest edition of Current Award Trends in Personal Injury.
If you get hit with a judgment, your home or auto policy will pay up to the limits of your liability coverage, plus attorneys’ fees. If your insurance doesn’t cover the tab, your future earnings, home and other assets could be on the line for the difference. You can protect yourself with an umbrella policy, which adds another layer of liability protection.
Under the umbrella. An umbrella policy typically covers the same things as your home and auto policies, plus a few more, including lawsuits that arise when you’re driving abroad or operating rented watercraft, or from alleged libel, slander or defamation of character.