At risk: Are you taking a financial gamble with your current insurance coverage?

DATE | 12/10/18
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A simple definition of what liability means is “the state of being responsible for something, especially by law.”

Risk and responsibility are part of our daily lives. We take a chance every time we get behind the wheel. Accidents happen in our homes. Sometimes people are sued for what they say or write.

And sometimes you are the one responsible. Are you confident your finances will be secure if the worst happens? You may be surprised at what your insurance actually covers—and doesn’t cover.

In the car

Auto liability insurance is required by law in most states. The two parts that are required are bodily injury and property damage liability coverage.

If you cause an accident that injures someone else, bodily injury liability protects you against claims up to the stated amounts for medical expenses, lost wages, pain and suffering, and other losses.

If you are at fault for damage to another person’s property, such as a car, its contents, or other property you damage in an accident, property damage liability coverage helps pay for their repairs.

According to the Insurance Information Institute, both the severity and the frequency of bodily injury as well as property damage claims have grown significantly in recent years. The increasing costs involved are affecting the price of auto insurance across the industry. In the two years ending in March 2016, for example, insurance claim costs rose 13%—more than 10 times the inflation rate.

Why so expensive? Several factors are at play. The cost of auto body work has risen nearly 40% more than prices overall since 2005. Repairs on newer cars are more complex and costly. People are driving more miles as unemployment rates are down. Medical costs continue to rise. While weather is variable, data shows there are rising claims in regions with more severe weather conditions. And finally—and what many consider to be a top danger on the road—the rise in distracted driving accidents, especially with cell phones, adds to the number of accidents and their seriousness.

Member Benefits recommends a minimum of $250,000/$500,000 (per person limit/per accident limit) for bodily injury and $100,000 for property damage. However, the costs you may owe in an at-fault accident can far exceed these limits.

At home

If someone falls down the stairs in your home and is injured, you could be sued for damages. Personal liability coverage is part of your home or renters insurance policy. It can include coverage for medical bills, pain and suffering, lost wages, legal fees, and even death benefits if a guest has a fatal accident on your property. It also provides coverage for accidental damage you may cause on someone else’s property.

If you have a pool or backyard trampoline, you could be at risk. Even if someone comes over and uses them without your knowledge, you may be liable for any potential injury they may suffer—and your home insurance may not cover it.

Keep in mind that your home or renters policy will only pay up to the policy limit, so if you are found responsible for paying any negotiated or court determined damages, that amount could easily exceed your policy limits—putting your future earnings at risk. In recent court cases, certain plaintiffs have been awarded damages of several million dollars.

Get proper protection

Because typical auto and home policies can still leave you financially vulnerable, we recommend you also have personal liability insurance (umbrella insurance) for additional protection.

Umbrella insurance provides you with significant additional coverage at a very low cost. It can also provide protection for certain acts not covered by your home policy, such as false arrest or imprisonment, libel or slander, defamation of character, invasion of privacy, or wrongful eviction.

No one expects to be responsible for catastrophic loss, but it does happen. And the risks are very real, even if you carry the highest liability limits on your auto and home insurance.

Protect yourself. Contact us to review your current insurance and answer your questions about umbrella insurance by calling 1-800-279-4030. Or sign up for a personal consultation at