By Matthew Gaude & Shawn McGuire
Everybody knows they need medical, auto, and home insurance to protect their household and finances from unforeseen circumstances (such as medical diagnoses, car accidents, or weather-related damage). However, most people are not familiar with what an umbrella policy is and whether or not it is relevant to them.
An umbrella policy is extra liability coverage that will cover any additional costs incurred beyond your current coverage limits (1) for any of your insurance policies if you are held liable for a situation.
If you have done well financially and you want to make sure your finances and assets are well-protected for extreme circumstances, then you may need an umbrella policy, and here is why.
Covers Beyond Your Current Policies
Every insurance policy has a coverage limit, the maximum dollar amount your insurance company will cover for a claim. (2) Coverage limits normally range from $50,000 to $500,000 and are typically enough for a single incident only involving you and your property (e.g., home and car).
But what happens when you are in a situation where many people are involved and need to be compensated?
Imagine getting in a car accident with 3 other people and the amount you are responsible for is close to $1 million due to medical bills and attorneys fees, but your coverage limit will only cover up to $250,000. An umbrella policy can supply the additional $750,000. Otherwise, your only other option is to drain your savings and your assets.
Umbrella policies can be purchased with coverage limits of $1 million or more, and will cover additional attorneys fees incurred in addition to the coverage limits. (3) Think of it as an extra layer of protection for situations like the one laid out here, serving as an additional lifeline for your financial portfolio.
Perfect For High-Net Earners
As stated above, umbrella policies cover $1 million or more in a single claim. If you have high net worth with well over $1 million in assets, then getting an umbrella policy will ensure that you will never have to cash in on those assets in situations where you are held liable.
To find out your net worth, calculate the value of your home, your car, your stock portfolios, and your bank accounts and add them altogether. If they total up to more than $1 million, then you should definitely consider getting an umbrella policy.
Suitable For Anyone At Risk For Lawsuits
If you are at high risk for getting sued due to your occupation (owning and renting out property as a landlord, for example) or take part in chancy recreation (such as waterskiing), then you will need to consider your personal likelihood of getting in a lawsuit.
According to the Insurance Information Institute, a $1 million umbrella policy is about $150 to $300 per year and a $2 million umbrella policy is usually an additional $75 per year. (4) Considering that attorneys fees and medical bills can easily be hundreds of thousands of dollars, the price of an umbrella policy is quite affordable in comparison.
How We Can Help
If you are still unsure as to whether or not you need an umbrella policy, we at Live Oak Wealth Management would be more than happy to help! Call our office at 770-552-5968 or email [email protected] to schedule a consultation. Or, if you prefer, you can simply click here to schedule an appointment online.
About Matthew
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insight and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
About Shawn
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc. (APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. Seek tax advice from a tax professional.
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(1) https://www.investopedia.com/terms/u/umbrella-insurance-policy.asp
(2) https://www.central-insurance.com/docs/FAIQs-home-coverage-limits.htm
(3) https://www.investopedia.com/articles/personal-finance/040115/how-umbrella-insurance-works.asp