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personal liability insuranceAccording to the Association of Trial Lawyers of America, civil lawsuits, including those involving personal liability claims, cost the U.S. economy $233 billion each year. The average compensation payout for a civil injury suit is $60,000. The average awarded in a punitive damage lawsuit is $50,000. Most of us don’t have that kind of cash to spare. If we accidentally injure another person—or they injure themselves on our property—we could lose our savings, our home equity and our other assets. Fortunately, insurance offers some protection.

Homeowner’s and Auto Insurance

While your homeowner’s and auto insurance policies offer some liability protection, it may not be enough in the event of a serious incident—or even a minor incident when experienced lawyers get involved. According to an article by CBS Money Watch, most homeowner’s insurance policies only cover personal liability claims up to $300,000. Most auto insurance policies provide up to $250,000 per person and $500,000 per accident for bodily injury—though few drivers actually purchase that much.

Experts advise you review your current liability coverage under both your homeowner’s and auto insurance policies with your agent. While most states set minimum liability requirements, it may make sense to increase your coverage limits. For example, to thoroughly protect your home, investments and other assets, it may be wise to increase the bodily injury liability limit on your auto insurance policy to the maximum, even if your state of residence requires less. You may also want to buy additional personal liability insurance equal to or greater than your net worth.

Additional Personal Liability Insurance

Don’t think you actually need additional liability coverage? You might be surprised. Experts suggest purchasing personal liability insurance of at least your net worth if you have teenage drivers at home, keep dogs as pets, regularly entertain on your property, have a pool at your residence, keep guns around or own a boat. All of these factors, and many others, can increase your chances of eventually facing a liability claim.

Additionally, auto and homeowner’s insurance policies never cover all the types of liability claims you may encounter. Typically excluded are defamation of character, libel, slander and false arrest. Personal liability insurance—in the form of an umbrella liability policy or personal excess liability insurance—does cover these charges.

Personal Liability Insurance is Affordable

Personal liability insurance is a valuable supplement to your existing insurance policies and may cost less than you expect. In fact, according to CBS Money Watch, you may be able to obtain $1 million to $2 million in supplemental coverage for as little as $250 to $300 per year. Contact your insurance agent or financial advisor for assistance with choosing the right policy as well as advice on how much coverage you need in your particular financial situation.

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