In today’s increasingly litigious society, asset protection is an area of wealth management that affluent physicians cannot afford to ignore. Inadequate liability insurance is perhaps the most common oversight that could cause a doctor’s assets to be vulnerable in the face of legal action. The most common example is a simple car accident; if you are found to be at-fault in a liability lawsuit, and the jury award exceeds your policy limits, you could be required to pay for the damages out of your current assets, or even future income. A carefully drafted risk management plan for your personal and professional life will help protect your investments and future earnings.
In the insurance world, a line is drawn between your professional, and personal pursuits/assets and this article addresses protecting your ‘personal’ assets through high levels of liability coverage. You can purchase higher liability coverage in two ways, either by raising the limits on each of your individual policies, or, by purchasing a separate policy called an “umbrella” or “excess liability” policy that will top off all of the underlying policies at one time. An umbrella or excess liability policy is the most cost-effective method for protecting current assets, as well as future earning potential. There is a difference between an ‘umbrella’ and an ‘excess liability’ policy, so be sure to talk through this with your insurance consultant.
How Does it Work?
A personal umbrella/excess liability policy coordinates with your homeowner/renter and auto policies to provide liability protection above (excess liability) and sometimes beyond (umbrella) the coverage offered by your other policies. For example, the $250,000 of per person bodily injury liability coverage on an auto insurance policy is probably not enough coverage if you or one of your vehicles causes an accident that seriously injures another person. Therefore, you would be personally liable for damages that exceed these policy limits.1
Auto accidents aren’t the only mishaps that would fall under the protection of a personal umbrella policy. Your property’s “personal liability” coverage comes into play for incidents that occur not only on your property, but throughout your personal life such as on the golf course or accidentally bumping into a fragile senior citizen at the grocery store. Lately, there has been an increase in claims due to kids posting on social media and pets that believe they are defending their home.2
When purchasing umbrella insurance, you’ll often be required to have certain minimum liability limits on both home and auto insurance and it is recommended to have as many policies as possible with the same carrier in order to coordinate claims coverage. It’s extremely important to understand the limits of what your umbrella actually covers and for how much so you can take proactive measures to organize your assets so that any exposure is limited to the scope of the policy. These limits will be very clearly defined by the insurance company.3
Why is it Necessary?
Even if you have a pristine driving record, accidents can and probably will happen at some point no matter how cautious you are. In fact, approximately 15,000 traffic accidents occur each and every day.4 Seven-figure lawsuits stemming from auto accidents are not uncommon as even one day in an ICU can reach up to $100,000 in extreme cases. Such a verdict could severely hamper your long-term financial planning.
Umbrella and Excess Liability policies can help pay court costs and awards, up to the limit stated in your policy documents and you often purchase these policies in increments of one million. When you consider an additional $1 million of liability coverage can cost less than $20 a month, purchasing an umbrella policy is an economically-responsible decision especially for families with significant assets or future earning potential.5
You’ve invested far too much time and resources in your career in medicine only to see it jeopardized due to an unfortunate tragedy involving you or your family. Implementing an asset protection plan that legally separates your personal and professional assets will ensure that everything is not fair game in the event of a liability. But this must be done on a proactive basis with the assistance of qualified legal counsel, as asset protection laws and case history vary widely from state to state.
- Bruce Sackrison, “Do You or Your Business Need an Umbrella (Policy)?” Napa Valley Register (May 2017). http://napavalleyregister.com/business/do-you-or-your-business-need-an-umbrella-policy/article_d25bdb2d-3de5-5a1e-839b-5a7ca79637a1.html
- Gina Roberts-Grey, “How an Umbrella Policy Could Save You From Financial Ruin” Realtor.com (May 2016). http://www.realtor.com/advice/buy/umbrella-insurance/
- Ike Devji, JD, “Liability Insurance Umbrella Policies Vital for Physicians” Physicians Practice (October 2013). http://www.physicianspractice.com/blog/liability-insurance-umbrella-policies-vital-physicians
- Andy Glasgow, “Kelly Insurance Emphasizes the Value of Umbrella Insurance” Digital Journal (August 2017). http://www.digitaljournal.com/pr/3439905
- Becky Rapse, “For Added Protection, Buy an Umbrella (Policy, that is)” Cleveland Jewish News (July 2017). http://www.clevelandjewishnews.com/features/business/for-added-protection-buy-an-umbrella-policy-that-is/article_e613b30c-7141-11e7-9159-d78527f83e77.html
Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Insurance services offered through Larson Financial Group, LLC, an insurance agency.