The Biggest Threat To Your Wealth:

A Lawsuit

You take many precautions to get the best returns on your investments, minimize taxes, and protect your home & family from financial hardship.  However, most people don’t think about protecting their wealth from legal judgements.  Some people believe the risk is so small that it will never happen to them, but all it takes is one accident to completely overwhelm your current insurance limits leaving you with a pricy legal defense bill. Don’t think it can happen to you? Check out some local recent lawsuits here and here.

Often home insurance policies have about $100k-$300k in liability coverage & auto policies with good coverages may have between $300k-$500k in bodily injury liability along with $100k in property damage. However, a lawsuit can often quickly surpass these limits leaving you to pay for your legal defense and whatever settlement amount the court may decide on.  Your home, business or real-estate holdings, future income, and non-qualified retirement assets are left to foot the bill.  Although rare, the court can order up to a 25% wage garnishment until the settlement is paid off.

To cover claims in excess of either your auto or homeowners policy, you can purchase excess liability coverage through a Personal Umbrella Policy.  They are called umbrellas since they cover excess liability from any policy you have under it. These could be homeowners, auto, motorcycle, boat, renter’s, landlord, recreational vehicle, and others. Another area Personal Umbrella Policies help protect families is in personal injury lawsuits, such as in liable or slander cases; for example a family member posts a negative online review that results in an alleged defamation lawsuit.

You can usually purchase $1 million in liability coverage for around $150-$400 per year depending on your risk factors. Umbrella policies usually have $1 to $5 million in coverage, but also come in larger amounts for celebrities, business owners, executives, and politicians.

Everyone has the risk of being sued over an accident, but if you have any of these risk factors, you may need an umbrella more than the average person:

  1. You have a dog (or other large animals like horses).

  2. You have teenage or young drivers in your household (or you are accident-prone).

  3. You have a long commute to work or drive a lot.

  4. You volunteer for (or are on the board of) a non-profit, or coach youth sports.

  5. You have a pool or trampoline (or other fun structure at your home).

  6. You (or your children) play sports in public areas.

  7. You are a landlord or own multiple properties.

  8. You have a boat, motorcycle, ATV, or other recreational vehicle.

  9. You frequently entertain guests at your home.

  10. You own a business.

  11. You have a job that others associate with making good money.

  12. Your  income is higher than the average for your community or you live in a high income community.

Which of these risk factors do you have?