The Conversation that Could Make or Break Your Financial Plan

In today’s world we are all exposed to a lot of potential liability, and all it takes is one rare but devastating lawsuit to wipe out all the wealth you’ve worked hard to build. Investing in a personal umbrella insurance policy can help provide an extra layer of protection for your assets and earnings from future liability.

Why Umbrella Insurance?

If you search online for information about personal umbrella insurance, you are likely to find examples of how this type of coverage protected families from catastrophic financial loss. Jury awards and out-of-court settlements for negligence can be costly and may run into the hundreds of thousands and even millions of dollars. For example, a jury awarded $500,000 to the family of a young child that was hurt while playing with a neighbor’s BB gun.* A $2,500,000 settlement was made to someone injured on an improperly installed diving board.* Although infrequent, accidents like these happen. Investing in a personal umbrella insurance policy can help provide an extra layer of protection for your assets and earnings from future liability.

What Does Umbrella Insurance Cover?

You likely have some liability protection already, through your auto and homeowner’s policies. These policies should protect you against ordinary events but as the examples above illustrate, their limits may not be enough defense to cover all the assets you’ve built, including savings, a brokerage account, and valuable personal property like art or other collectibles. Most people understand the importance of protecting their savings and investments from possible litigation, but you could also get sued for future earnings. Umbrella insurance can protect your future income as well. Having an umbrella insurance policy provides coverage that goes beyond the limits of your primary auto or home liability coverage.

How Much Umbrella Insurance Do You Need?

As with most types of insurance, umbrella policies are not one size fits all. A general rule of thumb is to match the amount of your protection to your total Net Worth, but your specific circumstances may require a more nuanced approach. In this article, our Financial Planning Team highlights the different risk factors that should be incorporated into the analysis.

Ultimately, it takes an analysis of your specific assets, activities, and financial goals to suggest an appropriate amount of umbrella coverage. At Heritage, our ongoing and evolving financial planning process includes an analysis of auto, home, and umbrella insurance policies to determine if they are sufficient to meet your needs without overpaying for too much coverage.

Who Needs Umbrella Insurance?

For high net worth individuals and families, asset protection is of paramount importance. While the chances for a financially devastating lawsuit are admittedly small, relative to all other types of insurance, the cost of protecting against that risk with umbrella coverage is inexpensive. At Heritage, every detail matters when it comes to the success of our clients’ financial plans. We encourage all of our clients to provide their Wealth Management Team with up-to-date copies of all their insurance policy declaration pages to ensure their hard-earned assets are properly protected.

If you are a client and haven’t provided the declaration pages of your policies to your Wealth Management Team recently, then you may be missing out on a worthwhile conversation on this aspect of your financial security. For example, have you considered the following for your homeowner’s insurance?

  • Adding a Building Code Upgrade Endorsement
  • Adding an Identity Theft Restoration Endorsement
  • Adding a Home Cyber Protection Endorsement

Our consistent review of our clients’ insurance policies has yielded meaningful results.

Our Financial Planning Team has identified numerous cases in which items that have gone overlooked or unreviewed are brought to light and addressed accordingly. Here are a few examples of real-life oversights corrected or improvements implemented for our clients:

  • Removing Mortgagee Endorsements left on Policies for Mortgages that no Longer Exist
  • Updating Unchanged Appraisal Values for Separately Scheduled Items that have Appreciated Substantially
  • Highlighting Exorbitant Premiums and Providing Referrals for More Competitive Pricing

Providing this liability analysis or reviewing your existing umbrella policy is one of the many pieces of your comprehensive wealth management plan Heritage Financial helps with.

Want to learn more? Check out our insurance checklist and contact us to start an open dialog regarding your current level of protection.

Do I need umbrella insurance?


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