Grabbing an umbrella.

Perhaps the most important part of an auto or homeowner's insurance policy is the liability coverage, which protects you against legal claims triggered by damage to people and property.

Every state has its own rules regarding automobile liability insurance. While some states require $50,000 in coverage for bodily injury liability, many states have lower limits. Still, you may want to opt for the higher amount, so you're better protected.

Meanwhile, even though standard homeowner's policies come with some liability coverage, perhaps as much as $300,000 to $500,000, it may not be enough to protect against a court judgment that could be $1 million, $2 million or more. And remember, the liability portion of an insurance policy has to cover not only any settlements or court judgments, but also attorney's fees.

That's why you may want to consider an "umbrella" or "excess liability" policy to cover your cars, your home and any watercraft. Umbrella insurance is also important if you own a small business where, say, customers will be coming in and out frequently.

A $1 million umbrella policy can be purchased for about $150 to $300 a year. The next million might cost about $75 and maybe $50 for every million after that. Premiums will likely be higher in large metropolitan areas. An umbrella policy is typically purchased from your homeowner's or car insurance company. Many companies won't issue coverage unless your existing home and auto policies meet their required liability limits.

INVESTMENT AND INSURANCE PRODUCTS: NOT FDIC INSURED • NOT A BANK DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NO BANK GUARANTEE • MAY LOSE VALUE

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