Do you need personal liability umbrella insurance?

Although we already had health, life, disability, automobile, and homeowner's insurance, I recently addressed a gap in our insurance coverage by adding personal liability umbrella insurance to the mix.

In today's litigious society, an accident where you are found to be at fault could cause financial ruin for you and your family. Umbrella insurance is helpful in that case because it provides liability coverage when you exceed the limits of your homeowner's and automobile insurance. Since I own my own home and two automobiles in addition to some financial assets, I decided to get some extra protection by purchasing umbrella insurance.

My local insurance agent informed me that I must have minimum limits of coverage for my home and auto insurance:

• Auto insurance bodily injury coverage of $250,000 per person and $500,000 per accident.
• Homeowner's insurance personal liability coverage of $300,000.

In my case, it cost an additional $132 per year to bump up my auto insurance liability coverage to the required levels.

I was also able to get a 10% discount on my homeowner's insurance by switching it to the company that I have my auto insurance with. I researched my old and new insurance companies with the free resources at Standard & Poor's, Moody's, and A. M. Best, and found that my new insurer was rated higher than my old one. At that point, I was ready to make the change.

With all discounts, I was able to add 1 million dollar liability coverage (as an endorsement to my homeowner's policy) for an additional $115 per year. Adding in the increase in auto insurance, the total was an additional $247 per year.

I believe that spending about $250 per year for umbrella insurance is a pretty reasonable amount of money to pay for the added liability coverage. Rates can vary though, since they may be based on credit score, driving record, and homeowner's insurance claim history.