Thread by @baldridgecpa

As a financial planner we find our clients are consistently underinsured.

Umbrella insurance is an important part of your financial tool kit.

Living up to its name, it sits on top of all of your other property and casualty policies providing additional coverage.

☂ 🧵👇🏻

I like the stuff! Off the top of my head -

1. It is relatively inexpensive. Not a great reason, but hear me out.

I was quoted $21/mo for a 1MM umbrella policy.

For what I pay for all of the insurance I have it makes sense to take all of my policy limits to one million.

Umbrella insurance is inexpensive because the carrier is only taking incremental risk between the limit of the original policy and the top of the umbrella policy limit.

This leads to my next point -

2. Umbrella insurance fixes a lot of the issues that exist in your insurance policy that you don’t even know are a problem.

If you had a 30k property damage limit on your auto policy and totaled someone’s new BMW 750 in an at fault accident, you would be liable for damage >30k.

Many think they are insured when they have tons of liability exposure!

Where umbrella helps in the example above is the insurance co would pay the excess damage.

They would have exposure on damage in excess of 30k (auto policy limit) and 1MM (umbrella policy limit.)

With this in mind, insurance companies ensure you have high enough limits on the original policies in the first place.

This serves to cut their exposure and yours in turn.

3. I sleep better at night having it.

I know I have offloaded blue sky risk in my life to an insurance company that has a department of litigators that fight ugly claims all day long.

So between the top of my policy and 1 MM they are on the hook - let them fight it..

Umbrella insurance is a simple and relatively inexpensive way to align your financial incentives with a huge corporation that is about to pay out a ton of $$.

Compared to the ongoing complication and cost of other asset protection strategies it seems like a no brainer.

So how do you get it? Now is a good time to call your insurance company or a good broker and shop policies.

I mentioned I was quoted $21/mo for my policy - once my policies were combined I was given a discount on my homeowners for having the ☂️.

My incremental cost was $4/mo

Note - I don’t sell insurance, but provide fee only, fiduciary financial planning services for our clients - these are some of the exact issues we look at in a financial planning engagement.

I’ll continue to write about the elements of financial planning over the next couple of weeks.

In addition to asset protection and insurance, financial planning includes tax, investment, estate and retirement planning and cash and debt management.

Comment if you have any specific questions or experience w umbrella insurance.

What other parts of financial planning interest are most interesting to you right now?