They say an ounce of prevention is worth a pound of cure. In risk management terms, nothing may be more important to the high net worth individual than to have an umbrella liability insurance policy. Umbrella policies generally start at one million dollars of coverage and typically activate after basic home and auto insurance coverages are exhausted.
Many types of events can trigger the need for this type of insurance coverage. Do you have domestic help in your home? Do you own a dog, have a teenage driver in your household, or have a swimming pool? These are all examples of liability risks that can lead to large claims and even lawsuits. At a Tupperware party at my home, a friend tripped on a garden hose guide. I was happy I had good insurance and that her issues could be resolved with therapy. Without the proper insurance coverage, it could have turned out to be a much different story. Not only does an umbrella policy provide lawsuit coverage, but it can also provide coverage for legal defense costs and personal injury, such a libel claims or even claims stemming from non-profit work. No matter where you are in the world, an umbrella policy provides coverage. Imagine you rent a moped in Bermuda or a boat in the Caribbean and something goes wrong. Do you really want your hard earned savings, retirement nest egg or college fund subjected to a lawsuit?
The cost considerations may even be minimal. Most insurance carriers like to see $300,000 of homeowners and $250,000 on auto liability insurance before issuing an umbrella policy. If you are not at those levels, your premiums could rise, but you probably should be there anyway. To help offset any additional costs, consider consolidating all of your property and casualty insurance with one provider. This could potentially save as much as 20% in premiums and pay for most of the extra umbrella coverage. Another strategy to minimize cost is to increase your deductibles. Umbrella insurance coverage typically starts in the $150-$200 range for the first million dollars of coverage with each additional million costing about $50-$100 annually.
If an umbrella policy makes sense for you, it is a great catalyst to review and re-quote your entire insurance package. Get quotes from at least three different carriers. Not only will you have stronger comprehensive coverage but you might even end up paying less!