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Q: Are Umbrella Policys Necessary?

2011 May 1

Determining the level of coverage to carry for an umbrella is not an exact science.  The first step is whether an umbrella is necessary to begin with.  The most significant driving force is the size of your personal assets and net worth. The more you have to lose, the more there is a need for protection.  Usually your home value can help dictate the size of an umbrella.  In addition, a persons community identity and profession can also lead someone to have to carry higher limits that others.  This occurs many times for physicians since most people assume that they have more asserts and therefore more insurance so suits against them tend to be filed at higher amounts.  The cost for additional million dollars layers are also less than the first layer so the cost of higher limits are an even better value.  For most people a limit in the $1-3 million would be more than enough unless they have accumulated significant wealth.  If someone has a $220,000 home, is in debt with very limited savings then just carrying $500,000 of personal liability on your home and auto would be a very adequate level and Dave would recommend using that money now for debt reduction.

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