What is Umbrella Insurance?

What is umbrella insurance?

It’s often called a no-brainer but most people do not have it which can put your hard-earned assets like your home and investments at risk. Today we are discussing a very cost effective way to protect yourself.

What is Umbrella Insurance? Is there any downside to having it?

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Full transcript:


Anthony Saffer & Alex Okugawa

Alex Okugawa 0:00
It’s often called a no-brainer, but a lot of people don’t have it. And it can put your hard-earned assets like your home, or your investments at risk. Today, we’re talking about a very cost-effective way to protect yourself. Okay, Anthony. So you know, a lot of people know about auto insurance, home insurance, why we have to protect ourselves. But a lot of people don’t know about umbrella insurance,

Anthony Saffer 0:23
Our friend Jeremy Walter posed this question on Twitter, he said, Is there any downside to umbrella insurance? And you can see from the comments, the answer is largely No.

Alex Okugawa 0:32
Umbrella insurance really is like an extension of liability coverage on your auto home or even like watercraft coverage,

Anthony Saffer 0:40
So here’s an example… You have a party at your house, someone trips and falls, they sue you for a million dollars, your homeowner’s insurance kicks in and provides say, $500,000 of insurance.  We still have a gap of 500,000 of insurance and you couldn’t be on the hook for that. So rather than come out of your pocket, that’s where an umbrella insurance policy can kick in and pay the remainder.

Alex Okugawa 1:02
And although an umbrella insurance policy can be relatively cheap to get a lot of coverage, there are some nuances you’ll want to pay attention to. So for example, for your auto or home policy, you might have to be at certain minimums in order to get an umbrella policy, but even then it can still be worth the coverage. So how much coverage should one get? And what can we kind of expect cost-wise?

Anthony Saffer 1:25
Yeah, I’ve heard the rule of thumb that you should have an umbrella policy that covers at least up to what your assets have. But I don’t know that it doesn’t necessarily prevent someone from suing you for more than you actually have. So I think you need to be thinking about a few things and it’s not a perfect science. Like what are my liabilities? Are there certain things that maybe make me more susceptible to a lawsuit? Do I have a teenage driver? Do I have a rental property where there are bad better tenants in there? Do I tend to have guests over quite a bit? All these types of things can lead to that, and you really just need to be thinking about okay, well what kind of coverage should I have in order to cover that? The good news, though, is that you can get several million dollars because it is an extension of your homeowners and your auto for like a few 100 bucks every year. It’s not expensive.

Alex Okugawa 2:10
But I think to your point, right even talked about, well, how much should I get? I think the problem is, is people overthink this Yeah, like, Well, should I do you know, coverage up to my net worth or should be two times my net worth or three times, people just overthink it. And then what happens is indecision kicks in, so then we just delay it, it’s probably better to honestly just get some coverage because it is so cheap. And then you can always evaluate it again in the future to help lower that risk. Because this is the kind of stuff that we look at. And we help people when we’re doing planning with them, as you’re saying, looking at insurance, investments, taxes, how does it all fit together? Because if we can have a great financial plan, but if you’re at risk for one car accident, you rear end that Bentley, and all of a sudden you’re now in financial trouble and you had it. Yeah, now the financial plan is out the window. So this is the kind of stuff we help people with. If you’d like to learn more, you can visit our website at one degree advisors.com Schedule a 15-minute call. We’d love to talk with you

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This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. See our website at onedegreeadvisors.com for full disclosures.

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