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In 2023, there were 22.7 million millionaires in the U.S. While an increase in wealth often brings greater financial flexibility, it can also lead to increased liability. Individuals with high net worth—or those perceived to have it—are at a higher risk of being sued. Personal injury claims, in particular, can result in substantial financial judgments.
Umbrella liability insurance provides an additional layer of protection for your assets in the event of a lawsuit. This coverage goes beyond the limits of your existing automobile and homeowners insurance policies.
Consider this scenario: Your teenage son borrows your car and gets into an accident, seriously injuring the other driver. The accident results in a lawsuit, and you are ordered to pay $1 million in damages. If your car insurance policy has a liability limit of $500,000, it will cover that amount. However, without umbrella insurance, you would be responsible for the remaining $500,000. This could mean liquidating assets, losing the equity in your home, or even having your wages garnished. With umbrella coverage, the additional $500,000 would be covered, protecting your financial security.
Umbrella liability insurance is typically sold in $1 million increments and usually costs just a few hundred dollars a year. It offers broad protection, covering a variety of situations, including bodily injury, property damage caused by you or a member of your household, and even claims of libel, slander, false arrest, and defamation of character.
Deciding whether umbrella coverage is right for you depends on your lifestyle. You might want to consider purchasing a policy if you:
- Frequently entertain guests and serve alcohol
- Run a business from your home
- Give interviews that may be published
- Drive frequently or have teenage drivers in your household
- Live in a way that might give the impression of wealth
- Own a dog, especially one known for aggressive behavior
- Have jet skis, a boat, motorcycles, or snowmobiles
Even if you’re not a millionaire, umbrella liability insurance could be a wise investment. You don’t have to be a millionaire to be sued for a million dollars. Anyone working diligently to build their financial portfolio should consider limiting their exposure to risk. Umbrella liability insurance offers an affordable way to help protect your current assets and future income from unforeseen events.
Source: Credit-Suisse.com, 2024
