When unexpected storm clouds roll in to your life, you don’t want to be caught without an umbrella. Insurance plays a critical role in protecting you from getting drenched. A robust wealth plan requires having more than the bare minimum coverage. That’s why we typically discuss how to extend insurance beyond traditional packages with all of our financial planning clients.
A personal umbrella insurance policy, one that kicks in after the liabilityLiabilities are calculated by adding up your existing debts (mortgage, car loans, student loans, credit cards, etc.). limits of your auto and homeowners policies are exhausted, can protect against potentially devastating liability claims. How does it work? Let’s say you’re at fault in a car accident and the cost of injuries to others is $600,000. Your auto insurance policy has a bodily injury limit that tops out at $300,000—absent umbrella coverage, you’re on the hook for the next $300,000. With a sufficient umbrella policy, you would have insurance coverage for those additional damages.
Your wealth management team can help you determine how big your umbrella policy should be. Generally, to protect against any potential litigation, we recommend covering your liquid net worth.
Are you unsure of your net worth? Start by listing your assets: Bank accounts, investments, home equityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. and the like. Then add up liabilitiesLiabilities are calculated by adding up your existing debts (mortgage, car loans, student loans, credit cards, etc.).: Mortgage, car and student loans, credit card balances. Subtract those liabilities from your assets and that’s your net worth.
If you’d like help in figuring out if umbrella insurance is right for you or if your current coverage is adequate, please contact your wealth management team. We’re here for you.
For more from our team on insurance of all types, listen to The Adviser You Can Talk To Podcast episode covering common insurance needs for people of all ages.