What is an umbrella insurance policy and why is it important to have one?

While we hope that you never have to face a lawsuit that puts you at risk for losing a large sum of money, we do think it is wise to be prepared. Some insurance policies cover certain liabilities and at varying amounts from lawsuits, but if your insurance does not cover you in all areas of risk or does not cover a large lawsuit, you could find yourself paying more out of pocket than you would wish.

There is no plan that guarantees you will be 100% protected from a liability in a lawsuit, but an umbrella insurance policy is one of the safest paths you can take to protect your savings and assets.

What is an umbrella insurance policy?

Also known as personal liability insurance, umbrella insurance is coverage for liability if you are sued for damages that exceed the coverages of your other policies. This is similar to an excess liability policy, but they should not be confused with one another. 

An excess liability policy gives you a higher limit on your existing coverage. An umbrella insurance policy provides additional coverage not included in your existing policies. This might include payments for legal fees, damages, libel and more.

It is important to keep in mind that umbrella policies do not cover your own injuries or damage to your own property or business (unless you have a commercial umbrella policy). This means you need to make sure you have policies that cover these areas or you will have to pay out of pocket for them.

How important is it to have an umbrella insurance policy?

Umbrella insurance is not legally required, but it is advised for many people, especially those with a lot of savings and assets they do not want to lose. You might be the most careful person in the world, but accidents happen, and if you find yourself as the responsible party for any injuries and damages, you do not want to drain your own funds and assets to cover it. You may want an umbrella insurance policy if you:

• Have a significant amount of money in savings
• Own property, especially rental property
• Own a vehicle (and have a teenage driver in your household), a boat, a plane, etc.
• Participate in sports
• Own possessions that could lead to injury or harm, such as a swimming pool, trampoline or gun

Talk to a ProVise CFP® professional about including umbrella insurance in your financial plan

At ProVise Management Group, we want to see you succeed in reaching your short-term and long-term financial goals. An unexpected lawsuit can set you far back, but an umbrella insurance plan can help keep you on track. Our CERTIFIED FINANCIAL PLANNER™ professionals can work closely with you, your insurance providers and your legal team to help you come up with a financial plan that works for you.

We take into account your current financial circumstances, goals, risk tolerance and personal values when developing your personalized financial plan. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about creating a financial plan that includes a strategy for umbrella insurance coverage? Contact ProVise today to schedule a complimentary consultation.