he next time you get into your car and turn the key in the ignition, ask yourself, "What if ?"        What if you were to get into an accident? What if (yes, it's within the realm of possibility) you were at fault? What if there were injuries or property damage? Could you afford it?        If your answer is, "Sure--I have insurance," think again. What appears to be a lot of liability coverage on paper may not be adequate in real life. If you have a lot of assets to protect, or if your risk is fairly high, it's prudent to take a good look at your liability coverage for both automobile and home. You might decide to increase that coverage or even purchase an umbrella policy (see sidebar, Umbrella Coverage Protects When Regular Policy Falls Short).

Sophie B. started thinking about her liability coverage when it was too late--after an automobile accident last year. Her adult grandson, Peter K., says, "I don't know whether in the state of Iowa, where she lives, the insurance rules require a determination of fault. But if there was one, it was hers.        "It wasn't a high-speed collision, and the driver of the other car wasn't obviously injured," Peter says. "But he claims that the accident aggravated a pre-existing problem with his back. What is yet to be resolved is whether his claim has any merit or not. A doctor has said in an affidavit that his back was messed up before, and that if this accident made any difference it was less than 5% of the problem he has. But ... this guy sees a retired couple that has the assets, so he's going after them."        Peter says his grandparents had fallen into a pattern familiar to many: They'd been using the same insurance agent and the same company for many years. They had the minimum amount of automobile liability insurance their state requires. And every year when their policy came due, they simply paid the bill and forgot about it. They didn't speak with their agent about their growing assets as the years passed. And they didn't question how effective their policy would be in a real-life situation.        That's a common mistake, says Dan Kummer, senior personal lines specialist with the National Association of Independent Insurers in Des Plaines, Ill. "Many times what happens is, over the years, your assets grow and you forget how much you need to protect all of it," Kummer says. "If you start off early in life with a small amount, and you don't have many assets, that's probably all you need. But [people] tend to let that go over the years ... You need to sit down with your agent and look at your assets and what you need to protect yourself in case of a large liability suit against you."

One factor in deciding whether you need additional liability insurance is where you live. The minimum amount of automobile liability insurance the law requires varies drastically from state to state. If you live in Mississippi, the state requires only $5,000 in property damage liability; South Dakota requires $25,000. In Oklahoma, you're only required to have $10,000 in bodily injury liability, but in Minnesota, you must have $30,000. So, depending where it occurs, the same type of accident can have vastly different financial ramifications on an individual carrying only minimum coverage.        Another consideration is your personal risk. Do you carpool? Does more than one person drive your car? Consider any factor that increases the possibility of an accident. Bill Jolicouer, vice president of personal lines for CUMIS General Insurance Co., Madison, Wis., says those are the kinds of questions drivers must ask themselves when considering liability insurance. And homeowners need to factor in "attractive nuisances" such as swimming pools, and must count summer or rental property as added "exposures" to risk, he says.        "It's extremely important to think about," Jolicouer says. "It's a huge risk-management issue. And it's very important that when you determine what your liability insurance needs are, you're looking at your entire financial picture."        That means looking at your assets through the eyes of a plaintiff's attorney. "If your net assets are such that there is the opportunity for a significant settlement to be made, then if you don't have adequate insurance your assets are still at risk," Jolicouer says. "Another way of saying it would be, What are you willing to risk losing?" Can you afford losing your automobiles? Can you afford losing your home? Can you afford having your wages garnisheed? "Even the individual who can [afford it], has to start thinking about the cost of purchasing insurance protection vs. the probability of loss," he says. "And they'll always find it less expensive to purchase insurance than it is to place their assets at risk."

Look at your assets through the eyes of a plaintiff's attorney.

For Peter K., whose grandparents face devastating financial loss, there's an important lesson. "It's easy for a lot of bills to be racked up in property damage and injury claims, and potentially attorney fees as well," he says. "And it doesn't take a catastrophic accident to cause it to happen."

mbrella liability coverage can prevent an accident from destroying your financial life.        Coverage from an umbrella policy kicks in when damages exceed liability coverage a regular policy provides. Generally, for bodily or personal injury liability, an umbrella policy provides liability protection for $1 million or more, says Dan Kummer of the National Association of Independent Insurers in Des Plaines, Ill. "They [umbrella policies] usually go up to $5 million, in $1 million increments," he says. "It's in addition to the coverage you already have. So if you have $500,000 in liability coverage on your home and your car, that umbrella goes over those coverages."        The majority of insurance companies require a consumer to have a basic policy with the same company before taking on an umbrella policy. The cost is relatively minimal--often less than $200 per year for a $1 million policy. "It is a very, very small fraction [relative to the coverage] and will only kick in in those cases when you have a real serious problem, which is very few and far between," Kummer says.        Kummer explains how easy it can be for damages to exceed regular coverage. "These days, if you get into an accident with your vehicle and you kill someone, the verdict could easily be in the millions of dollars. Umbrella policies have been around for a while, but a lot of people are focusing on them more now because of the liability verdicts that are coming down."

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