As we head toward the end of this year and look with anticipation to the next, now is a great time to reevaluate your risk and determine if you are prepared for the new year and beyond. One question to ask yourself is whether you have protected your wealth from lawsuits or large claims that are not adequately covered under your current auto and homeowner’s policies. If you have not, you may want to consider adding an umbrella insurance policy.
What is umbrella insurance? In a nutshell, it is a relatively inexpensive way to protect wealth against low-probability but high-severity financial claims. These claims could result from events caused by you or members of your household, such as personal injury to others, damage to their property, or even defamation of their character.
While the probability of such incidents is low, the potential scenarios where they could happen are more commonplace than people realize. For example, driving your car, inviting people to your home, or even something as simple as commenting on social media could result in a claim against you. Importantly, unfortunate incidents can have significant financial repercussions if they lead a lawyer and client to seek monetary damages in a lawsuit.
Let’s look at some examples using the incidents cited above:
There are many reasons to own umbrella insurance, though in most cases it comes down to protecting financial assets against unexpected scenarios. As your advisors, we work with you to review your risks, assess your net worth, and evaluate your need for umbrella insurance:
The difference between #2 and #1 above is also a good barometer for determining the amount of umbrella insurance coverage you should buy. The good news is most umbrella insurance policies come with coverage in increments of $1 million or more and provide a lot of coverage for a relatively small annual premium. This makes umbrella insurance an attractive addition to a comprehensive financial plan.
To learn more about umbrella insurance and whether it is right for you, please contact your Modera advisory team.
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