Most people believe that they are adequately protected from liability by their automobile and homeowner insurance policies; however, reality may be far different. In addition, wealthier individuals and families can be particularly attractive as lawsuit targets.
The key to protecting yourself is two-fold: 1) recognizing potential sources of liability and 2) understanding how to minimize risk through appropriate levels and types of insurance. Let’s begin with recognizing potential sources of liability.
Most people recognize those classic scenarios of dog bite or someone slipping and falling on their property. Here are several more that are often overlooked yet worthy of consideration:
- An injury occurs to a guest in your swimming pool.
- A nanny claims discrimination following termination of employment.
- Your “over-served” guest causes an accident while driving home.
- Your comment at a community meeting is viewed as defamatory.
- While you are serving on the board of a local charity, the charity and board are sued.
Often such claims prove frivolous; nevertheless, you could spend tens of thousands of dollars defending yourself. If a claim is not frivolous and the plaintiff prevails, it could cost you millions!
How can you protect yourself? The first and best line of defense is to have adequate types and levels of insurance coverage. Consider the following steps:
- Review your vehicle and homeowner coverage. Typically, these policies max out in the $500,000 to $1,000,000 range; therefore, do not assume that they will adequately address your need for protection.
- Add an umbrella policy. It is relatively inexpensive and will provide coverage above and beyond what is available through your auto and homeowner policies. Coverage limits typically start at $1,000,000 and extend to $25,000,000 or more.
- Explore the possibility of “specialized” coverage. If you employ domestic help or serve on the board of a non-profit organization, you are exposed to special risks. Domestic employees may become disgruntled and allege discrimination, sexual harassment, or other wrongful practices. Paid staff at non-profits may allege improper employment practices, and board members may be personally liable for damages exceeding insurance coverage limits.
Sometimes, life is a lawsuit just waiting to happen, so consult with your financial or insurance advisor today!