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Umbrellas For All Seasons
Published Date : July 14, 2014
Risk management is an important component of overall financial planning, and various forms of insurance exist to help mitigate exposures. In addition to the familiar insurance for homeowners and comprehensive and collision on autos, personal liability insurance provides an additional layer of financial protection against the risk of causing bodily injury or property damage, such as when someone slips on your front stairs or a dependent child causes a car accident.
While most people rely solely on their homeowner’s and auto insurance policies to provide basic liability coverage, this level of coverage might be inadequate protection—even at the highest underlying levels available on these specific policies. Moreover, even those with modest wealth to protect need to carefully examine personal liability insurance, and consider an additional layer of defense in an increasingly litigious society. If so, Excess Liability insurance can be purchased. This type of insurance is commonly called Umbrella insurance, as in offering a wider “umbrella” of general coverage to such risk exposures.
Prior to purchasing Umbrella insurance, homeowner and auto policies should be reviewed to ensure maximum liability coverage has been elected. Often, many people choose to carry more liability insurance on their homes and not enough on their automobiles even though the auto is more likely to cause harm. This outcome is likely due to policies being purchased to meet minimum requirements of mortgages and driver’s licenses rather than in the context of personal liability protection. Of course, these higher limits are accompanied by higher premiums, but that is usually worth it for the extra layer of security.
For its part, Umbrella insurance is reasonably affordable within a standard range of amounts if built on top of sufficient—and usually required—underlying amounts of liability coverage on one’s home and auto (and boats, if applicable). This range is usually readily available from many insurance companies from $1 million up to $5 million in coverage. While increasing amounts of Umbrella coverage correspond to higher premiums, policies in this standard range are still relatively attractive given the extra liability protection. In addition, consolidating all three main policies—umbrella, home, and auto—with one insurance carrier can often reduce premiums by allowing a single underwriter to assess all related exposures. Umbrella limits over $5 million, however, often take the related calculations into another world of risk assessment and re-insurance analysis, and thus higher and escalating associated costs.
Whether to get Umbrella insurance or not, and for how much, should also be influenced by any unique personal circumstances, concerns, or exposures—including such things as a public profile, aggressive dogs or other unusual pets, or even simply young drivers and/or an active lifestyle. Libel and slander are also not usually covered by basic homeowners and auto liability, but they can be captured by the right type of Umbrella policy. It also helps to simply manage risks better. For example, teach children about social networking and libel as well as the dangers of texting or emailing while driving, which can be used to help verify both the timing and associated fault of an accident.
At its core, protecting wealth begins with assessing personal risk and mitigating that risk with a comprehensive insurance strategy that includes sufficient home, auto, and umbrella insurance. We invite you to include your Wealth Manager in a discussion of your insurance needs within the context of your overall net worth and lifestyle.
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
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