Every cautious person will tell you that our everyday activities put us at risk. Driving is dangerous. You could get hurt on a recreational vehicle. Unfamiliar animals—even if someone’s pet—could bite you if provoked. You could drown in a pool. Your identity can be stolen online. However, we continue to do all of these things because they are part of modern life. We let our children drive to school at 16. We enjoy riding four-wheelers and lazy Saturdays at the pool. Dogs are still man’s best friend. We keep in touch with distant friends and family through social media, all while being cautious for our own personal safety.
What the cautious person doesn’t tell you is how these everyday activities we enjoy so much increase our liability risk. State laws and mortgage companies require us to have insurance on our cars and homes to protect us in case of an accident. While many claims are within the limits of your auto or homeowner’s insurance policies, there are times when a claim will far exceed the coverage or there are gaps in coverage.
A personal umbrella policy provides a higher limit of liability to protect you against catastrophic liability loss. The policy usually kicks in when your homeowner’s, auto, or watercraft liability limits have been exhausted. It also covers bodily injury, property damage, and personal injury, including libel, slander, false arrest, and invasion of privacy.
Teen drivers are three times more likely to crash, and 14% of all deaths in automobile accidents are from teen drivers. In one example from Chubb Group, a teen driver was speeding and lost control of the car. It jumped the embankment and struck a building, severely injuring the passenger. The client’s Chubb auto insurance policy paid $500,000, and the excess liability policy paid an additional $5 million to the injured passenger.
In another example, a teen successfully sued her classmates and their parents, accusing them of bullying and humiliating her in a Facebook group. The teenagers and their parents needed to hire lawyers to defend these cases and money to pay for the judgments against them. A standard homeowner’s insurance policy may not cover these kinds of lawsuits. A lawsuit resulting from a social media post would typically allege inflicting emotional distress, defamation, or similar charge; however, a homeowner’s policy generally only covers bodily injury or property damage done to someone else. A personal umbrella policy often contains a personal injury clause that protects the homeowner from defamation, libel, or slander lawsuits.
Think about how often you see a friend or acquaintance take their rants and scathing reviews to Facebook when they think they’ve been wronged. If the target of the rant or negative business review sees it as defamation, a lawyer could easily defend a libel claim since the post is in “writing,” and hundreds of people saw it. The original poster could be sued for millions of dollars.
Without excess personal liability coverage, lawsuit judgments could put your current assets as well as future earnings at risk —a significant derailment of your financial future.
If you have questions on how to protect your household from claims beyond your standard homeowner’s or auto insurance policies, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
