Checklist: Liability Insurance Coverage

Things to do this weekend with your money

The liability coverage in your insurance policies protects your assets if you are sued by someone. Here’s how to check if you have enough coverage.

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Today: Determine your “insurable net worth”--in essence, what you have to lose should you be sued. Include the equity in your home, other real estate and cars, plus any savings you have. Art, jewelry, collectibles and other valuables should also be considered. It’s smart to include the value of your retirement funds in your total, even though these are usually protected from creditors; the value of retirement assets is sometimes used to calculate lawsuit damages even when the funds can’t be tapped directly.

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Saturday: Examine your auto and homeowner’s or renter’s insurance policies to determine your liability policy limits. They should at least equal your insurable net worth. If your net worth is $300,000, for example, you should have an auto policy that includes liability coverage for bodily injury of $100,000 per person and $300,000 per accident. Likewise, your homeowner’s liability coverage should be at least $300,000. If you have a high-income or high-profile job, such as a doctor or attorney, you may want liability insurance at least two times your net worth, since you may be a more attractive target for lawsuits.

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Sunday: If your coverage is inadequate, make an appointment tomorrow with your insurance agent or company to increase your liability limits. Most insurers cap their liability coverage for auto and homeowner’s policies at $250,000 to $500,000. If you need more, ask about a personal liability or “umbrella” policy. Such policies pay up to a predetermined limit ($1 million to $10 million) after your auto or homeowner’s coverage is exhausted.