Why You Need Umbrella Insurance
Author Kimberly Rotter just published an excellent article about Umbrella Insurance on the investment site, Investopedia.com, an amazing resource site full of articles, tools, educational content, and tips.
She discussed the value of having Umbrella Insurance for all kinds of potential scenarios, mainly because it provides liability insurance above and beyond your existing coverage. In the article, she interviewed our own J. Stephen Downey and explained who would benefit from this type of policy:
If your assets exceed the coverage limits on your primary insurance policy, for example, you're a candidate for umbrella coverage. This type of insurance protects assets. People who make legal claims go after the money. “The more you have, the more coverage you want,” says Downey. Insurance coverage creates a protective fortress around you. So if your wealth is at stake, you need the additional protection. “If you’re wealthy, you might buy coverage equal to double the size of your assets – $10 million in assets, $20 million in liability coverage,” explains Downey.
Umbrella coverage is very appropriate in your earning years, particularly if you are in a high-earning field. That’s because future wages can be awarded in a settlement, so a claim against you could include assets on hand and future assets that haven’t yet materialized. “Most people should have umbrella coverage,” says Downey, “and especially those in their 30s and 40s.”
Many car drivers want the peace of mind that comes with umbrella coverage as large claims often arise from auto accidents. A typical coverage limit is $300,000 but that amount may have no bearing on the size of a claim. If you have assets, know that the claimant will go after them. If a claim is awarded against you (see Build A Wall Around Your Assets), the insurance carrier is obligated to shell out an amount up to the coverage limit (much of which might be in the form of payment for your defense attorney's fees). At that point, the court will look at everything else you own or have invested or could earn to pay the remainder of the claim.
You can read the full article here -- we highly recommend it: