Global Courant
While anyone who owns a home or drives a well-insured vehicle has a good idea of the respective liability insurance policies that protect each, many have no idea what personal liability policies are all about and who should buy such protection. Such policies, known as umbrella insurance policies, pay for costs beyond the traditional protection offered by auto or homeowners insurance policies and pay for costs that such coverages cannot.
An auto insurance or homeowners plan comes with marginal levels of liability protection in case someone is injured or property is damaged by an event caused on or by the insured property. For example, if a vehicle swerves and hits another vehicle, the cost of the damage and any injury caused will be covered up to the policy limits.
But those limits can be very low compared to the potential costs of medical payments, insurance claims, lawsuits and court rulings against the owners of the vehicles. And in such situations, many people can file for bankruptcy and see their homes and other assets transferred to the victims of the accident and their lawyers.
And if someone is injured or dies or their property is damaged or destroyed while in an insured home or on a policyholder’s property, the cost could wipe out those assets. While the potential for a total loss could be mitigated by a simple bankruptcy filing for many people who own very little and could rent their homes instead of owning them, those who own much more and have large bankrolls as well as many tangible assets benefit greatly from personal liability insurance.
Personal liability insurance policies are generally very affordable for the levels of protection they can provide. Policy limits can be as high as $1 million or more, and they have relatively low premiums due to the fact that home, auto, and other property plans already provide some degree of such protection, limiting the number of likely claims that must be paid by the broader personal liability coverage. Due to the broad protection offered, such plans were dubbed “umbrella” insurance due to the wide range of coverage.
People most likely to benefit from umbrella policies include owners of large, expensive homes and other properties, business owners, and those who have large amounts of cash or investments that would be vulnerable to costly lawsuits and legal settlements without the protection of umbrella coverage. While it’s unfortunate to admit, the more likely someone is to be targeted in a lawsuit, the more assets he or she has, whether well founded or not.
But even the cost of a frivolous lawsuit can be high. And with the right protection, family homes and assets can remain in family hands rather than being liquidated to pay for a legal challenge or potential court settlement. When the potential cost of losing a home or other asset far exceeds the cost of carrying umbrella coverage, purchasing such protection is a necessity.
Explanation of personal liability insurance and who
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