They’re coming for your things….

Ever wonder what the Personal Liability Insurance does in your homeowners coverage?

Personal Liability Insurance protects you, your family AND your things in the case of a lawsuit. What? You get sued? Never!!! We love our neighbors and it would never happen!!

Well let’s say “little Johnny” comes over to your house to play with your kids. As the kids play, “little Johnny” slips and falls and breaks his arm. His parents take him to the emergency room. And no starts all the variables….

Do the parents have medical insurance? Will “little Johnny’s” parent’s want to sue you for expense and attorney costs?

All of this adds up. Now you have to hire an attorney and potentially are liable for medical, attorney, and mental anguish costs. Do you have that type of cash on hand?

This is where Personal Liability Insurance protects you.

The amount of personal liability insurance you require depends on the total value of your at-risk assets. These are the personal assets you own that are not specifically exempted from liability lawsuits by your state or the federal government.

Now what many people don’t know is your assets are at risk in a lawsuit:

Assets at Risk in a LawsuitAssets That May Be Protected from a Lawsuit
Vehicles titled in your name401(k)s
BoatsIRAs
Business assets that you personally ownAnnuities
Non-dwelling real estateHome equity
Future wagesSocial Security benefits
Money saved in your bank accounts
Investments
Personal belongings

Most of your belongings are at risk if you’re sued and don’t have adequate liability insurance. However, some assets, such as retirement funds, may be exempt from lawsuits. Each state has different rules regarding how protected retirement funds are from legal actions, so you should review local laws to determine what is at risk.

Most home insurance companies offer a minimum of $100,000 of liability coverage, and allow that amount to be increased to between $300,000 and $1 million. The difference in premium when you opt for higher liability coverage can be small, so we recommend choosing higher limits on your policy if you can afford it. For example, here are some sample costs of different liability insurance limits:

Liability AmountAverage Total Monthly Rate
$100,000$57.17
$300,000$59.33
$500,000$61.50
$1,000,000$64.08

If your total assets exceed the limit of your home insurance policy’s liability clause, consider purchasing an umbrella policy to provide extra liability protection. For example, if someone files a lawsuit against you for $1 million, and your home insurance policy has a $500,000 limit, you’d be liable for the additional $500,000. But if you have an umbrella policy that provides supplemental coverage of up to $1 million, your umbrella policy would pay the additional $500,000 after your liability coverage is exhausted.

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