You may have reached the "comfortable life" stage. Your business is growing your assets. You're hard work has paid off. Now, you need to make sure those assets are protected.
If you've reached this stage of your life, you're vulnerable to lawsuits. Incidents can occur during day-to-day activities that could potentially cost you. A serious accident could occur on your property. Or you or your employees could be involved in a car crash resulting in a lawsuit.
While homeowners and auto insurance policies do include liability coverage, the amount is limited. And if a court judgment exceeds the policy's limit, you'll have to pay the balance out of your own or your business' pocket. That's why most farm businesses have umbrella policies.
What you can do
Personal liability umbrella policies are generally sold in $1 million increments. They kick in after your other policies have been exhausted. An umbrella policy then pays claims up to the coverage limit for bodily injury, property damage, or personal injury.
Remember, though, that umbrella policies don't cover everything. While coverage varies widely among companies, common exclusions include intentional acts or damages resulting from a business. You must buy separate coverage for personal and business risks.
Dollar for dollar, umbrella insurance is relatively inexpensive because claims are rare. And, at least some of the risk is assumed under the primary auto or homeowner policy.
However, most insurers require that your primary policies meet certain limits before you can purchase an umbrella policy. According to the Insurance Information Institute, most insurers want you to have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on a homeowner policy before they'll sell you an umbrella liability policy for $1 million of additional coverage.
In this litigious society, it's wise to protect yourself from being a lawsuit target. Regardless of your cautious nature or good intentions, it may make sense to buy enough umbrella coverage over a wider area of liability.
Finally, two quick notes about personal umbrella policies: They can include protection in case of false arrest, false imprisonment, malicious prosecution, libel, slander, defamation, invasion of privacy or wrongful entry.
Some policies include coverage if you're held liable in the course of serving on the board of a not-for-profit organization. However, you might be better protected with "Directors' and Officers' Insurance."
Courtesy of Stambaugh Ness, a business accounting and management firm headquartered at York, Pa.