Is Your Umbrella Open? - Adviser Investments

Is Your Umbrella Open?

January 29, 2021

When unexpected storm clouds roll into your life, you don’t want to be caught without an umbrella. Insurance plays a critical role in protecting you from getting drenched—and for a truly robust wealth plan, it’s important to have more than bare-minimum coverage. That’s why our financial planning consultations always include a discussion of extending insurance beyond the traditional offerings.

A personal umbrella insurance policy—one that kicks in after the liability 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 coverage for the additional damages.

Working with your wealth management team, our financial planners can help you determine the appropriate amount for an umbrella insurance policy. Generally, we recommend that it should roughly mirror your liquid net worth—that’s a reliable way to ensure everything you own will be protected against any potential litigation.

Unsure of your net worth? Start by listing your assets: Bank accounts, investments, home equity. Then add up liabilities: Mortgage, car and student loans, credit card balances, etc. Subtract the liabilities from your assets and presto! That’s your net worth.

If you’d like help in figuring out if umbrella insurance is right for you, or whether your current coverage is adequate, please contact your portfolio team. We’re here to help you.


This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be viewed as a recommendation to buy, sell or hold any of them.

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