Do you own a pet? An estimated $1 billion is paid out each year because of dog bites, according to the Insurance Information Institute. Altogether, millions of lawsuits are filed in the United States each year, at an estimated cost of about $150 billion, or 2.5 percent of the Gross National Product, reports Citizens Against Lawsuit Abuse.
Therefore, your homeowner’s and auto insurance should include liability coverage. For auto insurance, you might want liability coverage of $200,000 per person and $500,000 per accident. Your homeowner’s insurance policy should have a $300,000 or even a $500,000 limit for liability coverage.
Even $500,000 worth of auto or homeowner’s liability might not be enough. If you have $500,000 worth of coverage and lose a $1 million judgment, the extra $500,000 might come out of your savings, your pension plan, your house, and other personal assets. Therefore, you should protect those assets with excess liability insurance, commonly known as umbrella coverage. This umbrella policy kicks in after your other liability insurance reaches its limits.
In most areas, you can buy $1 million worth of excess liability insurance for $150-$300 per year. If you want to buy $2 million worth of coverage, $3 million, or more, the extra coverage is even less expensive, on a cost-per-million basis.
