How Much Umbrella Insurance Do I Need?

Our clients often ask us, “Do I need umbrella insurance?” An umbrella policy is designed to protect individuals from highly unlikely but very costly events, often accidents. While anyone can be at risk of litigation, those who have (or appear to have) financial resources are at greater risk. For this reason, adequate umbrella coverage is an integral part of asset protection for affluent individuals or families.

How Much Umbrella Insurance You Need Depends on a Variety of Factors

Net worth is a good place to start, but there’s more to the equation. Heritage Financial’s Director of Financial Planning, Ed Jastrem, shares some thoughts on how to assess how much you may need.

“Determining if, and how much, umbrella insurance coverage you need is not a perfect science, but there are prudent ways to evaluate your circumstances. Using your net worth is a fair starting point. From there, consider expected future income and if your overall wealth is increasing or decreasing over time. Then assess your exposure to liability. Remember, two households with similar assets and income may have very different umbrella insurance coverage needs based on non-financial circumstances.

The more net worth, expected future income, and/or liability exposure you have, the more likely umbrella insurance is a good idea for asset protection. Particularly since it’s a very affordable type of insurance. $1 million worth of coverage can start as low as $150 per year.”

We talked more about umbrella insurance on our podcast, Wealthy Behavior: Talking Money & Wealth with Heritage Financial. In Episode 2, host Sammy Azzouz covered how individuals can minimize their personal risk and liability to protect their wealth.

Sammy’s guest was personal injury attorney Richard Mandel with Baker Law Offices, PC. As a personal injury attorney, Rich is the one suing. So he was able to provide unique insight into the need for umbrella insurance and the risk that wealthy individuals may be exposed to, particularly if they don’t have umbrella insurance coverage. They discussed how to look at your unique exposure, and what to consider across your auto, home, and umbrella insurance coverages.

Check out Episode 2 of Wealthy Behavior here. Be sure to subscribe to be notified about future episodes wherever you listen to podcasts.

Other Resources

Heritage launched Wealthy Behavior earlier this year to share valuable content about the topics (like, “Do I need umbrella insurance?”), strategies, and behaviors that are key to building and protecting personal wealth and living a rich life. Our first episode was a Primer on Cryptocurrency. Stay tuned for upcoming episodes that address:

  • knowing the right time to invest in the stock market,
  • finding a financial advisor you can form a strong long-term relationship with, and
  • getting the most out of your credit card rewards.

Is there a topic you’d like to hear us cover in our podcast? Email us and let us know!

Lastly, you may have joined us for our recent webinar, Tell Your Money What to Do: How to Be Financially Prepared for the Unexpected. Those who registered received a complimentary copy of Reflections on My Heritage, an essential (non-legal) document that ensures your ability to share treasured memories, pass on important family values, and provide important information to family members during times of transition. Get your copy of Reflections on My Heritage here.

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