It is true that most people have liability insurance for their homes and their cars. Those policies do provide some protection against lawsuits, but typically not large lawsuits such as those from a severe accident on your property or from a serious car crash.
But when you have assets exceeding the liability coverage on your vehicle or property, you should consider an umbrella policy. Those assets can include a second home, stocks, bonds and retirement savings, according to libertymutual.com.
Insurance is especially important to those who have what is referred to as an “attractive nuisance” such as a trampoline on the lawn or a swimming pool — items that can attract curious children, who then hurt themselves.
Insurance expert Jack Hungelmann at Bankrate.com notes that an umbrella policy includes lawsuit coverage of $1 million to start and coverage for defense costs, which can be $100,000 or more.
Typically, coverage costs $150 to $200 a year for the first $1 million in coverage, and about $100 for each additional $1 million.
Hungelmann calls it the best buy in the insurance business and recommends getting $1 million more in coverage than you think you need, because if you are sued you can’t go back and buy more.