You have a swimming pool, pond or trampoline. You have dogs, horses or other large animals. You manage a family trust. You host large parties in your home. You employ household staff. You have a high public profile.
When selecting the right amount of coverage there are a couple things to consider. Value of your assets: An umbrella policy should cover at least the value of your assets — this is what you stand to lose in a lawsuit.
Potential future income loss: Your current assets and future income could be at risk in a lawsuit. Even if you have a limited income now, consider your potential future income.
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Insurers typically sell umbrella insurance in million-dollar increments. With its high coverage limit, umbrella insurance generally offers good value for the cost. However, you may also end up paying more for your other insurance policies if you need to increase your liability coverage to meet the minimum limits required for umbrella insurance. Almost all major insurers offer umbrella insurance, but most require that you carry your auto, homeowners, condo or renters insurance with them, too.
You generally must buy a minimum amount of liability insurance on those policies before you can buy an umbrella policy; the minimums vary by company. RLI and Auto-Owners Insurance are two companies that offer stand-alone umbrella insurance policies, meaning you could carry your auto or homeowners coverage with someone else. An independent agent or broker can help you find options from these companies or others. Another big factor to look at when shopping is the maximum limit a company offers.
Remember that the best umbrella insurance for you will cover your hobbies and other activities. For example, if your idea of a fun vacation is renting a Jet Ski and hitting the water, know that some insurers may exclude these watercraft from umbrella coverage, while others, like Progressive Insurance , will cover rentals.
Below is a sampling of umbrella insurance offerings from major carriers. States available: Washington, D. Eligibility requirements: You must have underlying policies with at least the following limits:. Eligibility requirements: Requirements vary by state. Generally, your underlying policies must meet the following minimums:. States available: All 50 states and Washington, D. Eligibility requirements: Minimum limits for underlying policies vary by state. Eligibility requirements: You must have a Liberty Mutual auto policy with at least the limits below.
Homeowners, dwelling, watercraft, farmer's personal liability or general personal liability. Eligibility requirements: All vehicles and your primary home must be insured through Nationwide with at least the following limits:. Eligibility requirements: Minimum liability limits for underlying policies vary by state. Eligibility requirements: The following limits apply to underlying policies:. Homeowners, renters or rental property.
The more you have to lose in a lawsuit, the more umbrella insurance might be worth to you. Those with more assets or greater potential earnings tend to benefit most from an umbrella policy. You may also want to consider umbrella insurance if your lifestyle puts you at increased risk of injuring others and being sued for example, you have a swimming pool or go hunting regularly.
Again, however, one's actual need could be higher or lower. Assets held in employer-sponsored retirement accounts e.
With respect to your primary residence, it's possible that at least part of this component of your net wealth need not be included when determining an appropriate level of umbrella coverage. This depends on the degree of protection under the homestead exemption 2 for a given state of residence intended to prevent the forced sale of a home to meet the demands of creditors.
Note, however, that for the homestead exemption to apply, a homeowner generally must record a Homestead Declaration with the local registry of deeds. Annuities and irrevocable trusts may also be used as a supplement to or even a replacement for umbrella insurance to provide protection from creditors in some cases. But the protection available depends on the specifics of the trust or annuity in question, and also varies from state to state.
And of course, irrevocable trusts and annuities come with significant costs and other disadvantages that may outweigh the benefits of any protection from creditors that they may provide. So consult with a financial advisor or a qualified attorney before making decisions regarding strategies for asset protection, whether these strategies involve umbrella policies, trusts, annuities, or some combination of these.
The specifics vary greatly from profession to profession and state to state, so if you are a self-employed professional you may wish to consult with an attorney to better understand the risk that you might be exposed to along with the possible remedies available through insurance that may help mitigate risk.
Check with your insurance provider for pricing details. Start a conversation Already working 1-on-1 with us? Schedule an appointment Log In Required. Get the latest insights Access articles, webinars, and ideas on wealth planning and investment strategies. Get a weekly email of our pros' current thinking about financial markets, investing strategies, and personal finance.
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