I love insurance! Yes, I just said that. People think they’re paying for something without real benefit, but I disagree wholeheartedly. Let me tell you why...
Imagine you’re busting your butt at your job, your savings account has a few months worth of paychecks stacking up and your investment accounts are growing. You feel pretty darn good about your financial situation. You’re driving to work thinking about how empowering having this financial security is and BAM! You hit someone and the driver happens to be a brain surgeon in a $100,000 2020 BMW M4 (had to be exact here - I’m a car girl after all). You did some major damage to the car (it’s totaled), and sadly, to the surgeon’s hand. The surgeon can no longer perform surgery…
Your current car insurance is 100/300/100 (this is typically how it’s listed). Allow me to break it down for you:
$100,000 Personal Liability Coverage per person
$300,000 Personal Liability Coverage per accident
$100,000 Property Coverage (i.e. the other person’s car (the M4) and/or if you did any damage to the road)
He is suing you for lost wages in the amount of $800,000 and you have to replace his $100,000 BMW, yikes that’s $900,000!!! Your car insurance will cover the car with your $100k property coverage and $100k towards the lost wages under personal liability coverage per person – that leaves you on the hook for $700,000!!!!!!!!
Poof! Your net worth vanishes before your eyes and your wages are garnished. You are now in a horrible financial situation, you can barely cover your bills each month, you are going to be making payments for years and you have no net worth anymore.
But rest assured, I have good news, there is an insurance policy that isn’t expensive (we’re talking approx. $20 / mo.) that would entirely cover you in this situation…..meet the Umbrella Policy.
$1M Umbrella Policy: Why You Need It
Umbrella policies kick in when your auto or home liability insurance isn’t enough to cover a liability claim against you. Have you noticed how litigious our country is!? Take the surgeon’s story, the umbrella policy would have covered the $700k they sued you for entirely. Your net worth and income would have stayed intact, kept growing and the Surgeon would get a new BMW and be compensated for their lost wages so they can find their true passion in life. Doesn’t that sound like a much happier ending?
Why $1M? That’s where most Umbrella Policies start at. Depending on your current net worth and income $1M is a good place to start.
Stories from “Under” the Umbrella
No, I’m not an insurance rep, I just happen to enjoy living under the safety of this Umbrella Policy! It blankets over your home and auto policy AND extends to other things. Here are some true stories from StateFarm & Allstate, where the Umbrella has actually covered someone:
DOG BITES! Your dog bites someone and they sue you- hello Umbrella!
Pizza man delivering piping hot pepperoni pizza slips on water walking to your front door and they sue you for medical bills + loss of earnings – yes umbrella!
{Oddest one} You hit someone with a shopping cart in a grocery store where there happened to be water on the floor. The person slipped and fell and sued. Guess what came to the rescue? The Umbrella!
Auto Insurance: Things to Know
Most likely when you add an umbrella policy your insurance company will require you to increase your auto coverage. For me and my clients, we had to increase it to 250/500/100, which seems to be standard. Now, you will have more car insurance AND a $1M Umbrella. Hopefully, your insurance company gives you a multiline (multiple policies) discount. For me, the multiline discount entirely paid for the cost of the umbrella policy.
Paying for insurance doesn’t sound so bad now, does it? I’m going to bet your net worth and/or your income is WAY greater than what you pay in insurance for a year (at least I hope so). Remember in some cases, future wages have been used to pay a lawsuit if assets aren’t enough. Protect your assets and your income. This is financial security.
Hopefully, you think of insurance in a more positive light and as financial protection over what you are building, so it can’t be taken away and you. Go check out the Umbrella Policy.
If you want a partner along the way to help you not only grow your wealth but protect it, schedule a free 30-minute introductory call here.
