The most common liability coverage on a home

The most common amount of liability coverage that we see homeowners carry when they come to The Choice Insurance Agency is $300,000.  Limits offered by most insurance companies for a homeowners policy include $100,000, $300,000 and $500,000.  So why do most agencies and clients default to $300,000?  There’s no telling.

Woman causes minor fire and is sued for almost Two Million Dollars

There was an article in today’s Pilot Online that reports that Tina Grimes, from Baltimore, Maryland, is being sued because she was allegedly negligent in using a microwave oven unattended in a hotel room, which caused a fire.  The fire caused the sprinkler system to engage and resulted in $1.83 Million damage, which the hotel’s insurance company now wants to recover from her.

Was she negligent?  The courts will decide.  The court’s decision will also determine her financial fate.  If Ms. Grimes only has $300,000 of liability coverage from her homeowners policy (an average amount)  and a full judgment is issued against her, she will be responsible for the additional $1.53 Million and can have her wages garnished and liens placed on her property.  If she was diligent and has a bunch of money in savings/investments, they may become property of the plaintiff, potentially wrecking her entire life’s financial plan.

It can be worse

Having a $1.5 Million judgment is not even the worse-case scenario.  The worse-case scenario is if Ms. Grimes’ insurance company believes that they cannot settle the case under the $300,000 that they have at risk (if that’s the coverage she has).  In that scenario, her insurance company could cut a check for the $300,000 policy limit to the courts, pending the outcome, and then Ms. Grimes would be on her own.  She’d have to find, hire, and pay for all of our legal fees and then any judgment or settlement over the $300,000.  Paying for the legal fees can cost her tens of thousands more before finality is even reached!

More to lose means more insurance coverage needed

This case shows that the greater one’s assets and/or income are, the more important it is to carry high liability limits.  An umbrella liability policy is the right tool for any homeowner with high assets/high income and/or high risks such as young drivers, a swimming pool, a boat or RV, or rental properties.  Freak accidents happen and you can and will be held responsible if you’re negligent.  Not only does an umbrella liability policy provide more sufficient coverage, it keeps your insurance company on the case by ensuring they have a lot more skin in the game through.

Your best solution

At The Choice Insurance Agency, we teach that a sound financial plan includes a strong defense against events that would cause financial ruin.  We advise clients to self-insure events and items that they can financially absorb (such as collision on an older vehicle with no loan) and use their insurance dollars to protect themselves against the large, potentially devastating events that cannot be absorbed in their finances.

Wishing you much financial success,

 

 

Richard

 

The Choice Insurance Agency’s mission is to help you get from where you are to where you want to be financially by helping you build, achieve and protect your financial plan from unexpected events.  In the process, our goal is to deliver insurance services in a manner that exceeds your expectations.  See what The Choice Insurance Agency can do for you today. Give us a call at 757-416-5100 to speak with one of the licensed, professional members of our team or request a contact here. The Choice Insurance Agency. We’re on YOUR side. 757-416-5100 .