It’s 7:00 a.m. Thursday. The sun is up, but the desert heat hasn’t quite cranked up yet. It seems like the perfect morning to get a jump on things at work before the early-scheduled showing and open house later today. You wait for your neighborhood gate to open. You’re facing directly into the sun. Where did you put those sunglasses? Finally, the gate opens wide enough to pass through. Twenty yards forward to the stop sign, then a right turn on to Cliff Shadows Road. You look left. All clear.

In the context of this column, liability is defined as an act or damage someone is or can be held responsible for. In the insurance world, the most common “liability” discussed is your required auto insurance bodily injury and property damage liability coverage. We often say this coverage protects the other person, or the injured, mostly because the injured is the recipient of the monetary payout when a claim is settled. Many people, myself included, would contend that this coverage more accurately protects you.

In the blink of an eye, a typical morning can turn into anything but. When we left off above, your vehicle was inching forward.

Your eyes pan from the left back toward the front of the car and further toward the right in the direction you’re headed… and there he is. It’s not only the perfect morning to head to work a little early, it is also a great morning for a run. At the ideal moment in time and space, your car’s brakes work perfectly. There are at least three feet of air between the front bumper and his left knee. In this case, aside from an unwelcoming stare, there was no harm. Except, perhaps, a temporary spike in blood pressure.

But what if? What if the brakes had failed? What if, at the previous intersection, the runner’s path wasn’t delayed by a car? Or what if, a few moments earlier, the neighborhood gate had been a little quicker to open? Any of these “ifs” could have changed what occurred in that split second of time and the outcome to a

much more harmful one. Who would be responsible? How does insurance cover this? What are the limits?

With auto insurance liability, there are minimums driven by state law. In Nevada, those limits are $15,000 for bodily injury of one person in any one accident; $30,000 for bodily injury of multiple people in one accident; and $10,000 for property damaged in one accident. For the homes we purchase or rent, most property policies come standard with $100,000 of bodily injury liability coverage. So, how much liability coverage is appropriate or enough? This can be a very long, drawn out answer, or it can be a simple one.

I’ll give you the short version in the form of another question – what is your comfort level?

Liability is a funny thing. You may not be released of it simply because an insurance company has paid out the maximum amount covered by your policy. In a bumper vs. runner scenario, it would not be uncommon for very significant injuries or damages to occur. In that event, the minimum coverage amounts noted above may not protect you from continued responsibility to cover the injured person’s potential medical bills, lost income, and pain and suffering. Litigation is also not uncommon in these situations, and damages can easily measure into the hundreds of thousands of dollars. If you are deemed liable and your insurance coverage doesn’t fully cover the damages, your personal assets, home equity, and even future earnings may be up for grabs. Future earnings? Yes. Future earnings.

Protection from legal action can be as easy as having the right protection. A Personal Umbrella Policy, which provides additional liability coverage over and above other insurance policies (home, auto, boat, etc.), should be understood and considered. Personal Umbrella Policies (“PUPs”) generally provide liability coverage in $1M increments, are generally inexpensive for the amount of coverage provided, and may cover some risks not covered by your standard insurance policy. For instance, Personal Injury (think libel and slander), has become more and more of a reality in our digital age. Whether it’s a perceived, unwarranted “one star” rating on a public website or a misdirected comment by your teenager on social media, an umbrella policy can surely come in handy.

Understanding how you are covered when you are liable to a claim can be the difference between peace of mind and potential financial devastation. Your insurance advisor can help you make the right choices for your specific situation. I’m often told, “I don’t have any assets,” “I don’t own a home/property,” or “I don’t have lots of money in the bank.” My reply is always the same — you are the asset. And sometimes, when it rains, it pours. Umbrella?