High net worth individuals face unique liability risks that ordinary homeowners’ and auto insurance policies do not cover. With more assets, property, and public exposure comes increased opportunities for large claims. Umbrella insurance provides a higher layer of protection to keep your wealth intact when the unforeseen strikes.
At Bowthorpe & Associates Insurance Producers, we can help you customize coverage based on your actual asset exposure.
Do You Need Umbrella Insurance Coverage?
Standard homeowners and auto insurance policies have predetermined liability coverage limits. For most people and typical claims, these limits are sufficient. However, they may fall short in high-severity cases.
If you’re at fault in a major car accident with multiple injuries, medical costs and legal bills can exceed your liability limits in just a few hours. If someone is injured at your home, they may sue you for millions. But your homeowners policy only covers a fraction of that.
You would be personally responsible for the remainder.
That’s where umbrella coverage comes in. It kicks in above the limits of the underlying liability coverage on your primary policies. It can protect your savings, investments, and future earnings.
How Umbrella Insurance Works
Umbrella coverage does not replace your existing insurance.
Think of it as a coverage layer above your current policies. If you have auto, homeowners, and maybe even boat and rental property insurance, those policies will respond first.
Once the liability coverage on those policies has been exhausted by a covered claim, the umbrella policy “kicks in” and continues to pay claims up to its policy limits. This includes defense costs, settlements, and judgments.
You never have to file a separate claim with your umbrella company. Once the underlying coverage is exhausted, the umbrella seamlessly provides secondary coverage.
Examples of High Net Worth Risks
Perhaps you own multiple homes or rental properties. Or maybe you’ve purchased a boat or even a private airplane. With greater assets comes more opportunities for would-be claimants to pursue legal action.
What about hiring housekeepers or paying for a nanny? Employing others in your household could open up liability exposure. Hosting larger gatherings at your home? You could be at risk for defamation-type claims if someone posts a negative review online.
If your teenage son or daughter is driving your car, or someone gets hurt at your summer home, you could face lawsuits that exceed policy limits.
Bowthorpe & Associates Insurance Producers can help you assess your risks and find umbrella insurance that protects against them.
Coverage Limits Are Increasing
Umbrella limits used to be much lower. But these days, million-dollar liability claims are not uncommon. Juries are awarding larger amounts, and it seems like more plaintiffs are willing to file lawsuits.
With more wealth comes a bigger target on your back. Even small accidents can turn into lucrative lawsuits for victims to pursue.
The good news is umbrella coverage can help cushion you from these losses. It can cover damages awarded and help with your legal defense. Defense costs can mount quickly, even if you don’t pay a penny in damages.
Match Your Umbrella to Your Risk
Don’t just buy an arbitrary amount of umbrella coverage. Make sure your limits are high enough to protect your assets.
Take into account not just what you currently have in assets but your future earnings as well. Real estate, investments, business interests, income… If you have a few million in total assets, $1 million in umbrella protection won’t do you much good if there’s a severe claim.
Many high-net-worth clients buy one million to five million dollars or more of umbrella coverage. Every situation is different, but you get the idea.
Cost-effective
For just a few hundred dollars a year, you can have access to millions of dollars of coverage. That’s one of the best values in insurance.
You can help keep costs down by not having accidents and maintaining affordable underlying insurance policies.
Don’t Leave any Gaps in Coverage
It’s also important that your umbrella policy has consistent coverage with your underlying policies.
If you allow your current homeowners or auto policy to lapse, or have large limits/exclusions, your umbrella may not follow form and provide secondary coverage. Review your policies with us annually to avoid any gaps.
Conclusion
Umbrella insurance is an absolute must for high-net-worth individuals. When you have more to lose, you need insurance that can cover those high-risk scenarios.
Not only does it protect your current wealth, but it can also safeguard your future. Don’t wait until it’s too late to get umbrella insurance.
Frequently Asked Questions
What does umbrella insurance cover?
It can cover anything that would be covered under your current policies, but with higher limits. It provides secondary liability coverage above the limits of your underlying policies.
Once your homeowners and auto insurance have paid out, the umbrella provides coverage up to the limit of the policy. It can cover settlements, judgments, court costs, and legal defense fees.
How Much Umbrella Coverage Should I Buy?
That depends. How much do you have in personal assets? A good rule of thumb is to match your umbrella limit with your total asset exposure.
Many wealthy individuals purchase umbrella limits ranging from one million to five million dollars or more. Your coverage should be high enough to protect your current and future wealth.
Is Umbrella Insurance Expensive?
No, it typically costs just a few hundred dollars a year for unlimited coverage. Considering the protection it offers, it’s one of the most cost-effective insurance products you can buy.
Will Umbrella Insurance Cover libel/slander/personal injury claims?
Yes, most umbrella insurance policies cover libel, slander, and invasion of privacy.
Do I need good insurance underneath my umbrella policy?
Yes! Without adequate underlying coverage, your umbrella may not provide any coverage.
Your umbrella policy only pays after the limits of the underlying policies have been exhausted by a covered claim.