We have bought a home out in the country. Our modest little castle is nestled among the oaks and pines on eight acres of relatively undeveloped land. Deer feed behind the house. We are very happy, but that has nothing to do with the subject of this column. I’m going to sell a little insurance.
As part of the paper shuffle of loan closing, we bought a homeowner’s insurance policy on the house. The standard policy provides for $100,000 liability coverage. I recalled that my personal umbrella liability insurance policy required $300,000 liability coverage to prevent a “gap” between the two policies.
In casual discussion of this somewhat mundane piece of financial trivia, I have become convinced that many folks have no idea of what a personal umbrella liability insurance policy is. Joe to the rescue. I am committed to stamping out financial ignorance where ever it arises.
It will come as no surprise that we live in a highly litigious society. People sue us at the slightest provocation, both real and imagined. Some attorneys make their fortunes by soliciting on TV and billboards for prospective victims of your negligence to step forward and let them evaluate the case without obligation unless they collect damages for the client. Our fortunes are constantly threatened by the prospect of an automobile accident or someone injuring themselves at our home.
The customary limits of liability coverage are paltry compared to the awards frequently given by juries today. If the damage award exceeds your insurance limit, you are personally liable for the excess. Imagine the impact on your personal finances should a jury award a “victim of your negligence” $400,000 for the “pain and suffering” you caused and your insurance only pays up to $100,000. Are you ready to reach in the old pocket and come out with $300,000? Many of us are not.
A personal liability insurance policy can patch this crack in your financial armor. Such a policy provides insurance coverage of $1 million, $2 million or more to cover liability arising from automobile wrecks, injuries at your home, boating accidents, etc. In my case, the $1 million policy costs less than $200 per year.
Insurance has always been an interesting subject for me. Over the years, I have seen young people buy tons of life insurance to protect their family against their premature death but have no disability coverage at all. Incurring a disability sometime during the working years is much more likely than the likelihood of premature death. How would our families be impacted if we became disabled and were unable to work? Everybody who depends on the income from their labor to support themselves should have disability insurance coverage.
Most New Year’s resolutions are forgotten by now. This is a good time to resolve to overhaul your personal insurance situation. If you don’t have them already, get some quotes on a personal liability insurance policy and a disability insurance policy to patch the gaps in your insurance portfolio. You may never need either one, but if you do, you’ll need them in a big way.
Thought for the Moment
If anyone does not provide for his relatives, and especially for his immediate family, he has denied the faith and is worse than an unbeliever.
— 1 Timothy 5:8
National Geographic is printed by the Ringier-America company in Corinth.
Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. His e-mail address is firstname.lastname@example.org.