A client recently emailed to suggest that we remind all our clients of the importance of umbrella insurance. It was a good suggestion.
Regardless of your age, if you own any assets that you want to preserve, adding an umbrella policy helps to protect your assets. The more assets you have, the larger the umbrella policy you should obtain. (Umbrella policies often start at $1 million of coverage.) Many experts suggest one should have enough insurance to at least cover your net worth.
Costs for umbrella policies are relatively low considering the size of the coverage (a $1 million umbrella policy may only cost a few hundred dollars). In essence, the umbrella policy kicks in after other insurance coverage is exhausted, such as when you hit the limit of the liability coverage on your auto policy.
In addition to helping to pay for any judgments that may be awarded against you as a result of a lawsuit, an umbrella policy may also help to pay legal fees or even protect you if a judgment against you includes future earnings. If you have potentially more exposure, such as from owning a rental property, or driving passengers as part of a charitable endeavor, your insurance agent may advise that you buy over and above your net worth.)
The insurance company that writes your homeowner’s coverage can usually write an umbrella policy for the lowest premium. After all, isn’t a good night’s sleep worth a few hundred dollars a year?
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