Written by: Tyler L. Rivetti, FSS, LUTCF

What is umbrella insurance?
This type of coverage provides additional liability protection. Once the coverage amounts provided by homeowners and automobile policies are exhausted, umbrella liability can cover the excess. It’s important for physicians and attorneys to understand that this coverage does not provide protection against malpractice claims.

Basicscommercial-umbrella
High income and high net worth individuals are often targets of liability lawsuits. Homeowners and auto insurance typically have low liability limits. For example, let’s say your auto policy covers $500,000 of liability. If you are in an accident and sued for $2 million, your auto policy covers the first half million and you are on the hook for the rest. With a proper umbrella liability policy, the remaining $1.5 million not covered by the auto policy is insured by the umbrella coverage.

How much coverage
To determine how much personal umbrella liability insurance coverage is needed, individuals should add up the value of their assets. These assets should then be compared to the amount of coverage offered under their home and auto policies limits. Where there is excess liability not covered by home or auto policies, a supplemental umbrella liability policy should be considered.

What if I have limited assets to protect?
Many young doctors early in their career may not have accumulated enough assets yet. However, umbrella liability coverage is still extremely important. In the event of a lawsuit, a judgment could force an individual to pay from current assets and even future earnings. Even though assets may be low early in your career, umbrella liability coverage can help protect your future earnings. This needs to be considered when determining the amount of coverage needed.

Cost
Umbrella liability coverage is relatively inexpensive. A $1 million policy might only cost $150 – $250 per year depending on various factors. Many insurance companies offer multi-policy discounts. If you have homeowners, auto, and umbrella coverage with the same insurer, discounts can often times be offered to reduce your premium.

Summary
Umbrella liability is a very inexpensive way of protecting your current and future assets. Whether you are in a car accident or the mailman slips in your driveway, having excess liability coverage can go a long way towards ensuring you have a successful financial future.

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