Insurance Gaps May Pose Risks for High-Net-Worth Households

This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article discussing why it’s important for affluent families to reassess their liability coverage periodically:

Serious accidents don’t happen very often, but when they do, the impact can be devastating. And unfortunately, you could be held legally responsible if a member of your household causes a car wreck or if someone is injured on your property, even if you go to great lengths to help make your home and the surrounding area safe for visitors.

If you own a pool or trampoline, entertain often, have teenagers who drive, employ household workers, coach youth sports, or are a public figure, the odds are even higher that you could become the target of a lawsuit.

Of course, the wealthier you are, the more you stand to lose if a liability claim is filed against you. It’s important to reassess your liability coverage periodically and make sure it’s sufficient based on your family’s financial situation, lifestyle, and the related risks.

Is Your Umbrella Big Enough?

Standard homeowners and auto insurance policies generally cover personal liability, but you may not have enough coverage to protect your income and assets in the event of a high-dollar judgment. That’s where an umbrella policy comes into the picture, providing an extra layer of financial protection against lawsuits claiming that you or a member of your household is liable for bodily injury or damage to the property of others (up to policy limits).

To purchase an umbrella policy, you must first have a certain amount of liability coverage in place on your homeowners/renters and auto insurance (typically $300,000 and $250,000, respectively), which serve as a deductible for the umbrella policy. An umbrella policy will commonly provide liability coverage worth $1 million to $10 million. One general guideline is to have liability coverage in place that matches your…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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