Most of us have enough home and auto insurance coverage to protect our major belongings from accidents and damage. But what about the other guy’s losses? What if a visitor trips on your front step and breaks an ankle…your dog nips a guest…or you strike someone with your rental car on vacation in a foreign country?

Once you reach the payout limits of your existing insurance policies, you still would be on the hook for damages from any court verdicts or settlements that may include not just medical and property bills but also money awarded for lost wages and pain and suffering. Liability coverage of home and auto ­policies typically tops out at $500,000. But 13% of personal-injury awards today total $1 million or more. And it’s not just ultra-wealthy people who get sued in today’s litigious world.

One solution: Excess liability insurance, better known as umbrella insurance—a catch-all policy that offers additional protection beyond your existing coverage. Insider strategies for adding umbrella insurance…

Get coverage if you have possessions or engage in activities that can lead to injury and liability lawsuits. This isn’t just about cars, pets and slippery sidewalks. Examples: Your home has a pool, ponds, trampolines and/or guns…you coach your kid’s sports team…you frequently review products and businesses online (which could lead to libel or slander lawsuits)…you often serve alcohol when entertaining guests…you employ part-time workers such as health-care aides, personal assistants and/or gardeners.

Buy enough umbrella coverage to protect your total assets. If your net worth is $1.5 million and your current policies offer $500,000 in liability coverage, you would need a $1 million policy to make up the difference. The good news: Umbrella insurance is relatively cheap and more cost-effective than selecting higher liability coverage on existing policies. Premiums for $1 million of umbrella coverage average $200 to $400 annually. Plus, bundling an umbrella policy with your existing auto and home policies at the same insurance company can qualify you for discounts.

Watch out for “gotchas.” Umbrella policies come with lots of exclusions that vary depending on the particular policy. Common exclusions: Damage to any of your personal property (umbrella insurance covers only other people’s injuries and property damage)…boats and other watercraft…damages caused by your intentional or criminal acts…certain breeds of dogs such as pit bulls and German shepherds…flood damage…anything that is specifically excluded from your underlying home or auto policy coverage.

Retirees need umbrella insurance, too, especially those with significant assets in IRAs. While 401(k) plans generally are protected from creditors, there are no federal statutes shielding IRAs from seizure in a personal-injury lawsuit, and the laws vary from state to state. Older folks may engage in particular activities that make them more vulnerable to lawsuits. Examples: You’re on a board of directors of a charity and are sued for a board-related issue…you own a rental apartment or home, and a tenant sues you because of an injury that occurred on your property.

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