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Umbrella Insurance 101: Understanding Your Coverage Options

Umbrellas are not just for rainy days.

Umbrella insurance can help fill in some of the more unprotected areas not necessarily covered, in part or in full, by your other insurance coverage.

While everyone can probably derive some advantage from having umbrella insurance coverage, high-income professionals like physicians can especially benefit as you have more at stake and presumably more to lose.

Our friends at Forme Financial are sharing the following information on umbrella insurance with us today.



As a physician, your job comes with unique risks and challenges that not everyone faces. Umbrella insurance can help fill in any gaps in your other insurance policies and cover liabilities that aren’t related to your work. It’s a good idea to consider this extra protection for added peace of mind.

Before you continue, we want to share that at Forme Financial, our main goal is to help physicians improve their financial health and wellness. We spent over 2 years researching physician’s financial needs and pain points, including interviews with hundreds of physicians at all stages of their career. As a fiduciary, we have a legal duty to work in the best interest of our clients.


What is Umbrella Insurance?


Umbrella insurance is an additional type of coverage that can help protect you beyond your other insurance policies. It’s sometimes called personal liability insurance or excess liability insurance, and it’s designed to supplement your auto or homeowner’s insurance. This means that if you have a claim that exceeds the coverage limits of your standard policies, your umbrella insurance can cover the remaining amount. For instance, if you need to file a claim with your homeowner’s insurance, but your policy only covers a portion of the cost, your umbrella policy can help cover the difference.


Why Do Physicians Need Umbrella Insurance?


As we mentioned before, physicians experience risk differently than other careers. While you may already have insurance to protect against common financial issues, like unexpected death, disability, and malpractice claims, there are other risks to consider. Unlike many other professionals, you also carry the added risk of being a target with deep pockets, which can make it challenging to have all your bases covered. This is where umbrella insurance comes in handy. It provides extended coverage beyond your other policies and can help protect you from any resulting liability that exceeds your coverage limits.

One of the benefits of umbrella insurance is that it aligns your interests with those of the insurance company. They don’t want to pay a benefit any more than you want to be sued. This means that you essentially have their team of attorneys working for you to prevent large claims. So, it’s a smart move to consider umbrella liability insurance as part of your risk management toolkit.


What Does Umbrella Insurance Cover?


Umbrella insurance provides additional coverage that can help protect you beyond your other insurance policies. Here are some things that the average umbrella policy can cover:

  1. Bodily injury liability, including the cost of damages to the injured party. It can also cover medical bills or expenses related to treating an injury. If the incident results in someone’s death, it may pay for their funeral costs and your legal defense costs.
  2. Property damage liability. An umbrella policy can help cover damages to someone else’s property, such as their car or home.
  3. Landlord liabilities. If you own rental property, umbrella insurance can help cover certain losses at these properties.
  4. Defamation, slander, and libel, among other things.

It’s worth noting that umbrella insurance is intended to cover non-occupation-related liability. That means it won’t include things like professional malpractice (which requires separate insurance), property damage or injuries caused by an uninsured dog or recreational vehicle, or injuries or damage that your business may be liable for (for which there are separate business umbrella options).


Qualifying for Umbrella Insurance

Most insurance companies will require you to have auto, homeowners, or another form of insurance already in place. Umbrella coverage is designed to supplement, not replace, your existing coverage.

Additionally, insurance companies usually have minimum coverage limit requirements that you must meet before you can add umbrella insurance. This ensures that you have a strong foundation of coverage in place before adding extra protection with an umbrella policy.


Deciding on Coverage Amounts

A general rule is to have coverage that matches your assets. This means covering your assets from any possible judgment against you. As a physician, this may require higher coverage limits than you might expect.

Most physicians start with a policy of $1 or $2 million, but as their net worth grows, they may need more. Lifestyle factors like owning a boat or multiple recreational vehicles can also increase your risk profile. Ultimately, the amount of protection you need depends on the risks you’re willing to take and how much coverage you want to secure.


Umbrella Insurance Coverage Cost

The good news is that umbrella insurance is often inexpensive compared to other types of coverage. Depending on your individual risk profile, you can get $1 million in coverage for as low as $200 to $300 per year. However, if you have a boat, an RV, or a teenager who drives, your premium may be higher.

Many insurers will offer a discount if you bundle multiple policies together, such as auto, homeowner, and liability insurance. Keep in mind that insurers typically require you to have a minimum level of liability coverage on these policies before you can purchase an umbrella policy, which may increase the premium on your underlying auto or homeowners insurance.



Is Umbrella Insurance a Good Fit for You?

  1. Create a list of all your assets.
  2. Review your current insurance policies, like auto and home insurance. 3. Make sure your basic coverage is adequate, as most insurers require this before you can get umbrella insurance.
  3. Determine if your current liability coverage is sufficient to protect your assets and cover any potential legal judgments against you.
  4. Evaluate where you might be most at risk, such as if you spend a lot of time driving, have teenage drivers, own rental properties, or have recreational vehicles or a boat.
  5. Investigate your options, such as increasing coverage, bundling policies, or exploring pricing.
  6. Decide which options work best for your needs and take action. Remember, it’s important to protect yourself and your assets from potential lawsuits.


If you need help navigating umbrella insurance, our experts are here to assist you in finding the right policy.

Forme Financial is a comprehensive wealth management firm that offers unique services that a traditional financial advisor does not, including a true 360º financial overview and state-of-the-art proprietary technology that helps physicians connect with their advisor more frequently and conveniently.

The information in this communication was prepared for educational purposes only and is not a solicitation to buy or sell any security or insurance product, nor an offer to provide investment advice. All examples are for illustrative purposes only and may not be relied upon for investment decisions. Nothing contained herein should be construed as legal or tax advice and is not intended to replace the advice of a qualified tax advisor or legal professional. The information presented may have been compiled from third-party sources we believe to be reliable but cannot guarantee its accuracy or completeness.

Investing involves market risk, including possible loss of principal and investment objectives are not guaranteed.

Forme Financial is an SEC-registered investment adviser. Additional information about Forme Financial, including its services and fees, is available online at http://adviserinfo.sec.gov/.


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2 thoughts on “Umbrella Insurance 101: Understanding Your Coverage Options”

  1. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  2. Assets in a 401k are protected by ERISA, which protects that money against judgements and bankruptcy, so you can generally subtract those funds from the amount you want to insure under umbrella insurance.


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