When you think about insurance you usually look to what property you can lose due to a fire or accident. What will I do if my house burns down? How will I get to work if my car is involved in an accident and becomes undrivable? These are important things to worry about and insurance surely can address them but a larger problem could be your liability to others. If I cause an accident and inflict bodily injury onto another driver how will I pay their medical bills? If I am sued for a multiple vehicle accident will I lose my home? These are real scenarios that play out every day in our country.
Should you go out and buy a five million dollar umbrella policy just to be safe? Perhaps, but generally you can determine how much liability coverage you need by determining your net worth. If you don’t have a lot of assets then there isn’t much incentive to sue you for a high amount. Matching your net worth is a good first step and your underlying policies like your automobile or homeowners policy can usually cover that. If they max out then you can purchase an umbrella policy fairly inexpensively to meet that need.
In some states you can be sued and have your wages garnished in addition to the liquidation of your asserts, in this circumstance you may need to account for that in your coverage.
The last thing to consider is your risk tolerance. Are you willing to pay out more from your savings in the event you are found liable rather than paying higher insurance premiums for the coverage. This is a valid factor to consider and we do that everyday. You may be a person who has high deductibles because you are comfortable paying out more after the incident rather than ahead of time in premium dollars.
As you can see its important to think ahead of time about what you could lose if you are brought into a law suit and do your homework determining your net worth. Its better to be prepared and we can help you accomplish that task,