lb-logo1.png

Is a Personal Umbrella Policy Right for You?

Summary:

In an increasingly litigious society, protecting your wealth and assets has never been more critical. Imagine scenarios like your teenager causing a serious car accident or your family dog biting a guest—both situations could lead to financially devastating lawsuits. Most individuals have basic insurance policies for their homes and vehicles, but these often provide insufficient liability coverage for those with significant assets.

Picture this: Your teenager takes your car for an evening out with friends. In a tragic turn of events, they cause a devastating accident that claims one life and leaves two others with severe injuries. Or imagine a scenario where your normally gentle family dog, feeling threatened, bites someone on your property—and you find yourself facing a lawsuit.

These scenarios aren't just hypothetical—they represent real risks that many face. While many successful individuals and families are proactive about protecting their wealth, there's one crucial element that's frequently overlooked or inadequately addressed: the personal umbrella policy.

​For those with substantial assets, a personal umbrella policy isn't just an option—it's often a necessity. Here's why.

Beyond Basic Coverage

You likely already have standard insurance policies covering your home, vehicles, and possibly valuable items like artwork. But here's the crucial question: Given your personal wealth, is this coverage truly adequate?

For high-net-worth individuals, the answer is typically no.

Standard insurance policies generally cap liability coverage at $500,000. While this might seem substantial, it can prove woefully inadequate in a serious incident. If someone sustains injuries on your property, the damages sought could far exceed this amount. Moreover, your financial success itself can make you a target—plaintiffs may pursue larger settlements simply because they know you have substantial assets.

​Consider these risk-increasing factors that might make you more vulnerable to significant lawsuits:

  • Ownership of attractive nuisances (swimming pools, trampolines, or ponds)
  • Having horses on your property
  • Regularly entertaining large groups at home
  • Employing household staff
  • Serving on nonprofit boards

This is where an umbrella policy becomes invaluable. Also known as excess liability coverage, these policies activate when your primary insurance policies (home, auto, etc.) reach their limits.

For instance: If you face a $1 million lawsuit after an accident, but your auto insurance only covers $300,000, your umbrella policy would cover the remaining $700,000—protecting your personal assets.

Coverage Scope and Costs

Umbrella policies serve as a crucial shield against major claims and lawsuits that could otherwise devastate your financial security. These policies typically cover:

  • Physical injuries
  • Psychological trauma
  • Defamation (including slander and libel)
  • Liability for actions of dependents (such as children)

Important note: You must maintain underlying insurance policies (auto, home, etc.) to qualify for umbrella coverage.

Critical consideration: Ensure there are no coverage gaps between your primary policies and umbrella coverage. Your umbrella policy should seamlessly take over where other coverage ends. Additionally, verify that your umbrella policy doesn't exclude any risks that aren't covered by your underlying policies.

Determining Adequate Coverage

A common issue among affluent individuals isn't the complete absence of umbrella coverage—it's insufficient coverage. If a judgment exceeds your liability limits, you'll need to make up the difference, potentially forcing you to liquidate assets under unfavorable conditions.

Expert guidance: For those with net worth up to $20 million, your umbrella coverage should match your net worth. Above $20 million, it becomes a personal decision about risk tolerance.

Many ultra-wealthy individuals, particularly entrepreneurs, opt for the maximum available coverage. While they may never need it, they view the premium as a small price for peace of mind against catastrophic financial loss.

​Finding adequate coverage can be challenging, as many standard insurers cap policies at $5 million. For higher coverage needs, specialty insurers might offer policies up to $100 million.

Premium Factors

Your coverage cost depends on several variables:

  • Number and location of properties
  • Vehicle fleet size and covered drivers (including driving records)
  • Ownership of boats, aircraft, or other vehicles
  • Level of existing liability coverage

The good news? Umbrella policies are typically cost-effective because the catastrophic events they cover are relatively rare.

The Bottom Line

If you lack an umbrella policy, securing one should be an immediate priority. If you have existing coverage, review it to ensure it adequately protects your assets—and increase coverage if necessary.

Tim McNeely
Advisor to Dental Entrepueriers 

If you enjoyed this post, you won't want to miss out on my best-selling book.

It's the next essential read for you.

Dental Wealth Nation

Seven Steps to Decrease Taxes, Increase Impact, and Leave Your Thriving Legacy

Driven dental entrepreneurs who are incredibly successful at thriving while running their businesses often find themselves overwhelmed by financial confusion and fear in their personal lives.

​Their finances become complex and chaotic, and they don’t have the right team in place to bring clarity and peace of mind. I believe you deserve to thrive in the midst of financial uncertainty by being empowered to confidently move from chaos to control.

See other posts like this one:

Five Reasons Dentists Should Make Philanthropy a Family Affair

The Billionaire Money Rules for Dentists

Smart Ways for Dentists to Build a Moat Around Their Wealth

Proud to Be in Bakersfield.
Serving Dental Entrepreneurs & Executives Nationwide

Tim McNeely
Advisor to Dental Entrepreneurs
​Click here to book a call with Tim

© The Dental Wealth Alliance is a LifeStone Company - All Rights Reserved

This material is intended to be used for educational purposes and does not constitute a solicitation to purchase a security or investment advisory services. Some material on this site has been researched and prepared by BSW Inner Circle and its affiliates, CEG Worldwide, LLC and AES Nation, LLC. Timothy J McNeely has retained AES Nation to conduct research and prepare informational materials for his use. Mr. McNeely is a member of CEG Roundtable and pays an annual fee for these services. Mr. McNeely is involved in these activities through The LifeStone Companies.

Some materials is published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright by AES Nation, LLC. This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Past performance is no guarantee of future results. An investment in any security involves significant risks and any investment may lose value. Refer to all risk disclosures related to each security product carefully before investing..

*Timothy J McNeely is an Investment Advisor Representative.  All investment advisory services are offered through a RIA. The LifeStone Companies are not owned or legally affiliated with RIA and the activities conducted by Mr. McNeely under The LifeStone Companies are considered educational activities and are separate outside business activities.

Privacy, Cookie Policy, Terms, and Conditions