When Should You Buy Umbrella Insurance?

By Brett Gottlieb

Most of us would agree that it’s wise to have medical, auto, and home insurance to protect our households and finances from unforeseen circumstances, such as medical diagnoses, car accidents, or weather-related damage. But what happens when these types of insurance policies don’t provide enough coverage for what you need? Many times your homeowner and auto policies have limits, and significant catastrophic events can easily exceed these limits. Additionally, many of these auto and homeowner insurance policies have exclusions that list several circumstances that are not covered.

Is there another option? Thankfully, there is. An umbrella policy might be the right fit for you.

What Is Umbrella Insurance?

Umbrella insurance is extra liability insurance designed to help protect you from major claims and lawsuits. As a result, it helps secure your assets and your future. It kicks in when your other policies have been exhausted and provides coverage for claims that may be excluded by your other policies.[1] Umbrella insurance can provide coverage for things such as injuries, false arrests, lawsuits, property damage, and more. Umbrella insurance fills in the gaps and completes your protection, helping you to have total peace of mind.

Here are some situations that might make it valuable for you to have an umbrella policy.

When Your Current Policies Don’t Cut It

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 three other people and the amount you are responsible for is close to $1 million due to medical bills and attorney 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 attorney fees incurred in addition to the coverage limits.[3] Think of it as a safeguard for your financial portfolio and precious nest egg.

When You Have A High Net Worth

Since 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 obtaining 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 all together. Then subtract what you owe. If the total is more than $1 million, then you should consider getting an umbrella policy.

If Risk Is Part Of Your Life

If you are at high risk for getting sued due to your occupation (owning and renting out property as a landlord, for example) or you would be held responsible for someone else’s behavior (such as a teenager who drives, or a pet that bites someone), then you will need to consider your 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 attorney fees and medical bills can easily be hundreds of thousands of dollars, the price of an umbrella policy is quite affordable in comparison.

Get The Insurance Coverage You Need

If you are still unsure as to whether or not you need an umbrella policy, our team at Comprehensive Advisor can help! Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125 to get started.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees in Business Administration and Economics. Brett is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

With a combined experience of over three decades in the financial services industry, our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial solutions for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a retirement road map to help ensure their assets are protected and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Comprehensive Advisor are not affiliated companies. C.A. Financial & Insurance Services, CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Neither the firm nor its representatives may give tax or legal advice. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc. generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 720813-9/20

[1] https://www.geico.com/information/aboutinsurance/umbrella/

[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



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