Most individuals have some form of indemnity insurance as part of their homeowners or auto insurance but is it enough? In today’s litigious society it doesn’t take much to have someone sue you, rightly or wrongly, and it could end up costing you a fortune, even if you win. Of course, if you lose the result could be financial ruin.

Determining the right amount of coverage requires a careful analysis of your current financial situation as well as your lifestyle.

First, determine the monetary value of your assets and then estimate the legal fees you might have to incur to defend an action. Unless you happen to have substantial assets you can very quickly see how any legal action could cause severe financial hardship and quickly use up your assets.

Then look at your lifestyle. Do you have to drive a lot, do you have teenagers that drive, do you have a swimming pool on your property, do you entertain at home and have a lot of guests regularly at your home, do you own a dog, all of these can be cause for concern. Remember that parents are often sued as a result of actions by their careless teenager and you may think that Fido is the most wonderful dog in the world but one bite and you could be in for some serious legal issues.

Once you’ve assessed both your financial position and lifestyle risks, you should be able to come up with a number that represents the potential financial impact of a legal action taken against you and that’s the amount of liability insurance you should have. Determine how much coverage you already have with your homeowner or auto insurance and then look for an Umbrella Policy to top up your coverage. The nice thing about an Umbrella Policy is that it can go beyond just covering you for household and auto risks but can also protect against damages resulting from a false arrest, malicious prosecution, invasion of privacy, defamation of character, wrongful entry, eviction, slander and libel.

Remember, the purpose of liability insurance is to safeguard and protect your financial situation against unforeseen action against you by third-parties. It’s important that you have a sufficient amount to cover any potential loss. Speak to your insurance agent and they should be able to assist with the analysis, but don’t wait, take action now.