Why Personal Umbrella Insurance Matters for Protecting What You’ve Built—and What You’re Still Building
When we think about protecting our financial future, we usually think about how we are building it.
We contribute to retirement accounts, invest, pay down the mortgage, save for our children and work to build financial security.
But there’s another side of that equation that can easily be overlooked:
Protecting those assets from liability.
One serious accident can create a financial exposure far greater than many families realize. Today’s rising claim costs and increasingly large jury awards make that conversation even more important.
One Accident Can Change the Conversation
Imagine handing the keys to your 17-year-old on a Friday night.
A few hours later, there’s an accident involving another vehicle. Your teenager is okay, but several people are seriously injured.
Now consider the potential costs: medical expenses, lost wages, long-term care, property damage and legal expenses.
Suddenly, $250,000 or $500,000 of auto liability coverage may not sound as substantial as it once did.
And it doesn’t have to involve a teenage driver. A serious accident caused by you, an injury at your home, a dog bite or an incident involving a boat or other recreational vehicle could potentially create significant liability.
Your underlying auto or homeowners policy may provide the first layer of protection. A Personal Umbrella Policy can provide an additional layer of liability coverage above those applicable limits, subject to the policy’s terms and conditions.
The Cost of Liability Is Changing
Inflation isn’t limited to groceries, homes and vehicles.
Medical care, vehicle repairs, wages and other costs associated with liability claims have increased as well.
The insurance industry also uses the term social inflation to describe increases in liability claim costs beyond ordinary economic inflation. One factor receiving significant attention is the rise of exceptionally large jury awards, including so-called “nuclear verdicts,” commonly referring to awards of $10 million or more.
That doesn’t mean every family should expect a multimillion-dollar lawsuit.
It does mean a liability limit that once sounded enormous may not go as far as you think.
“But I’m Not Wealthy.”
That’s one of the biggest misconceptions surrounding umbrella insurance.
Consider a young family in their 30s. They own a home, have some equity, contribute to retirement accounts and are beginning to build an investment portfolio.
They may not consider themselves wealthy.
But what about the next 30 years?
Their future could include millions of dollars of earnings, investments and accumulated assets. What they’re still building can be just as important as what they’ve already built.
Further down the road, that same family may have significant home equity, larger retirement and investment accounts, higher income, additional properties or other assets.
The conversation simply evolves from building wealth to protecting wealth.
How Much Is Enough?
There isn’t a universal formula that says your net worth should equal your umbrella limit.
Instead, consider the entire picture: your assets, investments, home equity, income, future earning potential and liability exposures, including teenage drivers, rental properties, boats, pools and other activities.
Then ask a different question…
What size liability event could materially change my family’s financial future?
We spend years building our financial lives. We work with financial advisors to grow investments, CPAs to make smart tax decisions and attorneys to plan for the future.
Our insurance strategy should complement those efforts by helping protect what we’ve worked so hard to build.
A personal umbrella isn’t only for the wealthy.
It’s for the family handing the keys to a new teenage driver. The young professional building a career. The couple accumulating investments. The business owner building wealth. And the high-net-worth family protecting what they’ve already created.
Because your insurance shouldn’t only protect what you’ve built today; it should help protect what you’re still building for tomorrow.
