Boston Standard Wealth Management

Plan to Succeed

  • Home
  • About
    • Private Wealth Management
    • Our Team
    • Sustainability
    • Fiduciary Standard
  • FAQ
  • Blog
  • Contact
  • Client Login

Safeguard Against Catastrophe with Umbrella Insurance

April 23, 2019 by Lee Eudy

You’ve heard the charming little gecko say it a million times: “Fifteen minutes could save you 15% or more on car insurance!” And Geico is hardly alone; advertising low-cost coverage is a staple of home and auto insurance marketing. Unfortunately, many consumers misinterpret these ads, leaving themselves underinsured.

Confusing the price of insurance with amount of coverage needed

State guidelines dictate minimum insurance requirements to own and operate a vehicle. Likewise, homes with a mortgage (and most condos) have homeowner insurance minimums. But, contrary to the message hinted at by some insurance ads, your goal shouldn’t be to exclusively fulfill these minimums at the lowest cost possible. Not unless your home or vehicle is literally all that you own. And here’s why: if you are at fault in an accident or someone is hurt at your home, your legal liability extends beyond the value of the insured home or automobile. In fact, it extends to literally everything that you own. What stands between your legal liability and all those worldly possessions is the amount of liability insurance you carry at the time of the accident.

Getting behind the wheel is statistically the riskiest thing most Americans do every day. If you look down at your phone and accidentally run over a pedestrian, you’re likely to face a major lawsuit. The amount and type of liability insurance you carry could determine the extent to which you remain solvent after the litigation is completed.

Without a crystal ball, you simply cannot know exactly how much liability insurance you need, but, unless there’s very little standing between you and bankruptcy already, maxing the base benefit of your home and auto insurance policies is a worthwhile starting point. The monthly cost increase is modest relative to what’s at risk, no matter which insurance company you do business with. But let’s take this concept one step farther.  

Umbrella insurance covers you beyond the limits of  your home/auto policy

The maximum liability coverage possible on your home or auto insurance policies could still leave you paying out of pocket for any judgment exceeding those limits, not to mention the legal costs associated with the litigation. Like an actual umbrella, this type of insurance provides wider, more extensive protection. Plus it will cover your legal costs. Imagine a liability umbrella opened over top of your home, car, and the activities that occur in each.

How does it work?

  • Let’s say your regular liability insurance covers $250,000. If you get sued and lose to the tune of $1 million, you’ll owe a staggering $750,000 out of pocket. With umbrella protection, your insurer will take on the remaining $750,000.
  • It will also cover your legal costs. All you pay is your standard insurance deductible.
  • Unlike standard insurance plans with lower coverage maximums, an umbrella policy will typically cover more than an additional $1 million and can be structured to cover much more.

What does it cover?

Expenses tied to liability-related lawsuits. Primarily as they relate to…

  • What you owe for property damage, injuries, and funerals
  • What you spent on your own legal action
  • Any legal costs for claims of slander, libel, and defamation of character
  • Umbrella coverage can extend to businesses. These plans are tailored to specifically cover professional liabilities.

How much does it cost?

Not that much. Especially if you’re already at or near the max for your individual home and auto insurance policies. You can expect a $1M umbrella policy to cost somewhere between $150 – $300. Larger plans carry only marginal price increases. For instance, $5 million in coverage is $500 – $600 (quite a bit less than five times the $1M policy).

The final word?

Given what’s at risk and the relatively low cost of coverage, maxing your underlying policies and adding an umbrella policy is probably well worth the expense.

CliffsNotes:

  • Accidents happen. Liability insurance is an important risk management tool.
  • Umbrella insurance is the most comprehensive and cost effective forms of liability coverage.


Share this:

  • Click to share on Facebook (Opens in new window)
  • Click to share on Twitter (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)

Uncategorized

WHAT WE'RE READING

The Psychology of Money

Read Review

Subscribe

Provide your email address to subscribe to our quarterly newsletter to receive tips, news, and updates.

Recent Posts

  • 2023 Plan Limits
  • Pleasant Surprise for MA Taxpayers
  • I Bonds: Inflation’s Silver Lining
  • Rebalancing your 401(k) can be Confusing
  • 2022 Plan Limits
  • The Psychology of Money
  • Massachusetts Paid Family and Medical Leave
  • Few Changes in the 2021 Plan Contribution Limits
  • IRS Announces Tax Deadline Updates
  • The AfterTax 401(k) & Roth Conversions
  • TD Ameritrade January Mail-A-Thon
  • 2020 Plan Contribution Limits
  • The Per Stirpes Beneficiary Election
  • Safeguard Against Catastrophe with Umbrella Insurance
  • Giving Your Child an Allowance Can Really Pay Off
  • 401(k) limits are rising in 2019
  • Freezing your Credit Reports is now free. So what are you waiting for?
  • It’s FAFSA season!
  • State of Our Practice & Your Referrals
  • No Checks for Charity!
  • The Investor’s Manifesto
  • Charitable Giving in a High Standard Deduction World
  • Paying K-12 Tuition with a 529 Plan
  • 401(k) & Gifting Limits Set to Rise
  • Nudge
  • Equifax Breach & Identity Theft
  • Is The Tuition Bubble Starting to Leak?
  • Why YOU should pay your Group Disability Insurance Premium
  • Is your ESPP a fountain of guaranteed return?
  • Investing in Stocks vs. Markets

31 Church Street, Floor 3, Winchester, MA 01890 | Phone 781.721.2300 | Fax 781.721.0086

Site Disclosure | Client Relationship Summary | ADV | Privacy

Copyright © 2021

Disclosure

Boston Standard Wealth Management is registered with the Securities & Exchange Commission as an investment advisor. Our website is for informational purposes only and does not purport to render or offer to render personalized investment or financial planning advice. Advisory services may only be provided after the delivery of a disclosure statement and the execution of an investment advisory agreement by the client and the advisor. The website is intended to make available general information concerning our firm and the services we offer, but in no way should be construed as a complete description of either the firm or our service offering. Information throughout this site has been obtained from sources which we believe to be reliable, but we do not warrant or guarantee its timeliness or accuracy, and neither we nor our sources of information shall be held liable for errors or inaccuracies, regardless of cause, or any lack of timeliness or interruption in transmission to viewers. Nothing on this website should be interpreted as a real or assumed claim that past performance is any guarantee of future results.