Recession? Inflation? Volatility? However you feel about our country’s economic landscape, safeguarding your family’s financial well-being has never been more critical. One aspect of financial planning that many overlook is personal liability insurance, which can be a safety net to help protect you from unexpected and potentially devastating financial losses.
What Does Personal Liability Insurance Cover?
Personal liability insurance can help to cover you against claims resulting from injuries and damage to other people or their property. While standard policies offer basic liability coverage, it’s important to understand that additional coverage may be necessary to fully protect your assets and financial stability. Let’s review a scenario to illustrate it further.
Imagine you are hosting a backyard cookout at your home on a nice Summer day. The neighborhood children are running around the house playing a game of tag when a child trips over a garden hose that was left out beside the patio. The child’s arm is severely injured in the fall and requires emergency medical attention including surgery and recovery.
A few weeks later, you are served with a lawsuit from the child’s parents claiming you were negligent in not “securing your yard”, which led to their child’s injury and their subsequent medical bills, pain, and suffering. The claim is for a substantial amount, totaling hundreds of thousands of dollars to cover medical expenses, lost wages from parents’ time off of work for care, and compensation for ongoing pain and distress.
Your current homeowners’ insurance policy (in this scenario) has basic personal liability coverage, but the limit maxes out at $100,000, leaving you responsible for the remaining amount. How will you cover the remaining amount? Credit cards? Savings? This unfortunate incident highlights the importance of having adequate personal liability insurance.
Economic Factors Driving the Need for More Coverage
One of the key economic factors necessitating increased personal liability insurance is the rise in medical costs. As healthcare expenses continue to soar, the potential financial impact of liability claims related to medical injuries becomes more significant. This is compounded by larger legal rulings and settlements, which are becoming increasingly common.
High-profile cases often set precedents, leading to higher settlement amounts and influencing the cost of liability insurance. Additionally, social inflation – the phenomenon where societal attitudes and behaviors drive up the cost of insurance claims – plays a significant role. This can include higher jury awards, increased litigation, and broader definitions of liability, all contributing to the rising need for more comprehensive coverage.
As these large settlements become more frequent, insurance premiums rise accordingly, reflecting the greater risk insurers are taking on. For families, this means the potential financial exposure from liability claims is growing, necessitating a reevaluation of their insurance coverage to ensure they are adequately protected against these evolving risks.
Protecting Your Family’s Future
To protect your family’s future, having adequate personal liability insurance coverage is essential. This involves regularly assessing your current insurance needs and understanding the potential gaps in your policy. By doing so, you can ensure that you have the right level of coverage to shield you and your family from financial harm.
A personal umbrella policy (PUP) may also help “extend” your liability coverage. Often for as little as a few hundred dollars, a PUP can potentially add an extra layer of protection above and beyond the existing limits of your homeowners and auto policies. This may include injuries, property damage, lawsuits, and more.
Our agents can help you review your risks and understand your options for liability coverage.