How it works:
Personal liability coverage is oftenreferred to as a personal umbrellaliability policy because itworks in conjunction with bothyour homeowner's and auto insurance.Your auto insurance andhomeowner's insurance provide liabilityprotection up to a limit, usually $100,000or $300,000. For claims higher than thislimit, you would be personally responsible.When you buy a personal umbrella policy,you expand your liability coverage basedon the umbrella limits you purchase.
Limits typically start at $1 million andincrease in $1-million increments. "Anumbrella policy is one of the best bargainsin the insurance industry," says KellyByrne, owner of Independent InsuranceAgents, Inc. It should be noted that youmay be required to adjust your underlyinghomeowner's and auto liability coverageso that these limits dovetail with thedeductible of your umbrella policy. Umbrellacoverage is purchased through yourproperty and casualty insurer. How muchshould you own? If your net worth is over$50,000, a minimum of $1 million in coverageis an appropriate amount initially.
Professional liability coverage is oftenreferred to as E&O (ie, errors and omissions)or malpractice insurance. Professionalsshould want to have professionalliability insurance that protects themagainst claims that may arise out of theirbusiness relationships. Most professionalsare aware of the need for insurance, buthave questions about how much is enoughand whom they should buy from.
"Younger physicians should have atleast $500,000 to $1 million of malpracticeinsurance coverage," says Dr. DerrillCrowe, chairman and CEO of ProAssurance.As physicians continue to be a majortarget of lawsuits, they should considercoverage of $3 million or more. "Professionalsshould make certain that the companythey choose is financially stable andhighly rated by one of the rating services,such as A.M. Best," Crowe says.
If you are a professional working for acompany, don't assume that whatever coverageyour company provides is adequate.Professionals are not shielded from liabilitysimply because they are an employee ofa corporation. You should review the providedcorporate policy and determine ifyou need additional coverage.
Stewart H. Welch III is the founder
of The Welch Group, LLC, which
specializes in providing fee-only
wealth management services to
affluent retirees and health care professionals
throughout the United
States. He is the coauthor of J.K. Lasser's New
Rules for Estate and Tax Planning (John Wiley &
Sons, Inc; 2001). He welcomes questions or comments
at 800-709-7100 or visit www.welchgroup.com. This article was reprinted with permission
from the Birmingham Post Herald.