The umbrella can be considered an economical investment that offers valuable protection when it rains. Conceptually, umbrella insurance works in a similar manner. An umbrella policy can provide $1 million to $10 million (or more) of additional insurance beyond basic auto and home liability coverage. Let’s say your auto insurance includes up to $400,000 of liability coverage. In the event of a car accident with $1,400,000 of damages, a $1 million umbrella insurance policy can cover the remainder of your liability after your primary auto policy.

Do you have a pet? Do visitors often use the stairs at your home? Do you occasionally speak publicly about other individuals? These are a few examples from an unimaginably long list of reasons why the right umbrella insurance policy is an essential tool in personal risk management.

Coverage against damages in a lawsuit is not the only benefit of owning an umbrella policy, said attorney Mitchell Lapidus of Propp Lapidus & Jaffe, LLP, who specializes in estate and taxation law. “Make sure the cost of your defense is included in the cost of your coverage,” Lapidus said. If your legal fees aren’t covered, you might have to settle even if you are completely in the right. And should you ultimately prevail in a case, you could still incur large legal defense expenses if someone sues you. Umbrella insurance may provide you with additional flexibility.

There are many other factors, in addition to cost and provision for legal defense, to consider when selecting the ideal umbrella insurance policy.  Insurance providers have acquired differing reputations for the quality of their claims handling.  While many umbrella insurance providers require minimum liability coverages under homeowners and auto policies underlying the umbrella policy, certain companies will provide umbrella insurance policies that include non-owned automobile coverage and do not require underlying auto insurance.  Additionally, some umbrella policies include Excess Uninsured/Underinsured Motorist Coverage, which reimburses you for losses caused by uninsured or underinsured motorists, as well as for hit-and-run accidents.   It may also be wise, especially if you engage in public speaking or blogging, to ensure that your umbrella policy includes Personal Injury coverage to protect you in lawsuits for libel, slander or defamation of character.  Please feel free to contact Altfest Personal Wealth Management with any questions you may have about the details of umbrella insurance policies.

There is no magic formula to calculate how much coverage one should have. Many plaintiffs’ attorneys are reluctant to seek more than the insurance amount, says Morton Price of McLaughlin & Stern, LLP. As a result, he said, a couple of million dollars of coverage may suffice, unless one’s personal assets are far higher. Also, Lapidus adds that assets in retirement accounts already enjoy some protection under state law. Other attorneys may be more conservative, insuring up to or even beyond net worth. In some cases, it is possible for creditors to garnish future wages, a reason why it is essential, even for individuals with lower assets, to have sufficient coverage. The relatively low cost of the insurance – typically about $200 for the first million dollars of coverage and $100 for each additional million – makes it easy to be cautious. “The higher your net worth, the more coverage you want to get. It should not really cost that much more on a marginal basis,” said Lapidus. “Get as much as you can and just try to stay out of trouble.” You should consult your attorney or insurance agent about what amount would be right for you.

Umbrella insurance doesn’t protect against everything. If you have a full-time household employee, register that person as an employee and get workers’ compensation coverage.

We all know accidents can happen when we least expect them. Umbrella insurance can be a cost-effective form of protection against accidents that can be more unpredictable than the weather.

Altfest is proud to be the preferred wealth manager for members of the New York State Dental Association (NYSDA) since 2010. Learn more about our comprehensive financial wellness services for dentists at altfest.com/dentists.

 

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