What If You Cause An Accident? Liability Insurance to the Rescue
When I work with new clients, liability protection is a common blind spot. Most prospective clients haven’t reviewed their insurance policies. And most are unaware of the risk factors in their everyday lives.
Property Insurance: Overview
There are three types of property insurance. At least one of the three will apply to you:
- Car insurance is required by law.
- Homeowner’s insurance is required by the bank if you have a mortgage. Plus you want insurance to protect this valuable asset.
- Renter’s insurance will protect your belongings, and pay for incremental expenses if you were displaced.
The most important component of these three policies is liability coverage, which protects you if you:
- Are at fault for an accident.
- Injure someone else.
- Damage someone else’s property.
- Need an attorney. The liability coverage pays for your legal defense costs if you’re sued as a result of the accident.
You’re a busy professional woman. You may think you don’t need to worry about risk in your everyday life. But one of these risk factors may apply to you:
Let’s say you have a house cleaner who runs a load of laundry and doesn’t notice that it’s overflowing. The water floods and destroys your downstairs neighbor’s unit. You host a dinner party, and your dog bites one of your guests. You’re barreling down Telegraph Ave in Oakland on a scooter, and you seriously injure a pedestrian. Or you’re texting while driving and rear-end a car, causing serious injuries to the other driver.
The “liability” coverage through your homeowner/renter and auto policies protects you if you’re at fault. The liability protection through your homeowner/renter policy follows you. The accident doesn’t have to occur at your home. Liability coverage can cover your legal fees if someone sues you, including baseless lawsuits.
How Much Do I Need?
You want the liability protection to be equal to 1-2x your net worth. The maximum liability coverage is $500,000.
To Learn More
To learn more, download the full guide: The Single Professional Woman’s Personal Finance Guide: Common Blind Spots That Could Cost You (Now or Later). I discuss liability insurance and three other blind spots: 401(k), disability insurance, and estate planning.