Always Be Ready; Carry an Umbrella

Don't wait for a financial catastrophe to occur for you to look for umbrella insurance. While it might seem like nonsense, what would you pay for peace of mind?

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    Twelve thoughts on Always Be Ready; Carry an Umbrella

    1. Thanks for another helpful post. Once someone has saved up a lot, what do you think of using an asset protection trust as a cheaper alternative to some kinds of liability insurance like umbrella coverage? Or, perhaps should it be an extra layer of protection on top of a small umbrella policy to make one less of a target? Some of the new trusts in Nevada, for example, look quite cheap now, but I’m not sure how the prices compare to the large umbrella insurance policies.

      1. I don’t know much about trusts for asset protection but would love to have a guest post. Do you want to do the research and write something up for us? One thing to consider, as Managing Partner mentioned below, is that a big value of the umbrella policy is that it will pay for the defense. As he points out, a frivolous claim is worth the value of defending it and so an umbrella policy drops that cost down to zero for the insured.

    2. I have $2M of umbrella coverage and I would highly recommend it for lawyers have have saved a significant amount. If people know you have money, you can be a target for frivolous claims.

      As mentioned above – One of the great aspects of umbrella coverage is that they will assume the cost of defense. With the asset trust or LLC, that is on you. For a frivolous claim, the value of the claim is essentially the defense cost – which is only zero when someone else (like an insurance company) is paying.

      As a side note, most umbrella insurance (at least here in Chicago) seems to require that you purchase all the underlying insurance from the same company, so you pretty much can’t shop around for individual policy types.

      1. Makes sense that umbrella policy issuers would want to also provide the underlying insurance themselves since the chance of invoking an umbrella policy is based, in part, on the strength of the first-level policies.

        It’s so cheap to get umbrella insurance that I can definitely see raising it to $2M of coverage at some point.

    3. I think I got umbrella insurance when I bought my first rental property. Before that most of my assets were in retirement accounts and my co-op. I might transfer the rentals into an LLC for added protection but I think the umbrella insurance is pretty decent protection for now.

      1. As Managing Partner said, even with your assets in “protected” spaces like retirement accounts and a co-op, a lot of people will still assume that you’re a rich lawyer and if there’s a frivolous claim you’ll be stuck paying for defending it. Umbrella insurance makes a lot of sense. I’d up it pretty high if I had rentals.

        1. That’s an excellent point the cost of defending a claim…I should have considered that. Good thing that situation never came up and I have umbrella insurance now!

        1. We are using umbrella insurance from USAA. It’s a commodity product though, so I don’t think you need to buy it from a particular company. It’s usually cheaper to buy it from the same place where you have home/renter’s insurance and car insurance though.

    4. We have an umbrella policy that’s rolled into our home and auto. It’s maybe an extra $15/month for $1M in coverage? You want insurance against the remote and catastrophic risks – and that’s what the umbrella is there for! I should probably look into what it would cost to bump it up to $2M. It seems like such a no-brainer for professional folks to carry it.

      1. It is a no brainer and yet I wonder how many do? As you said, $15/month is incredibly cheap to take off the table a potential liability (however remote) that could wipe out your entire life savings. Those are the kinds of risks I like insuring against.

    5. With the rates being very low, nobody should fail to have an umbrella coverage in place for the unexpected eventualities. Although some might dismiss it since they have other insurance plans, any wise lawyer should ensure he is fully covered.

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