As an accounting professional managing others' finances, you appreciate the importance of safeguarding your financial assets. Be aware that in addition to professional liability, CPAs also face a host of personal and lifestyle risks. From unforeseen personal liability claims to unexpected legal battles, the financial repercussions can be substantial, and your personal assets may be at stake. Are you prepared?
With the added protection of a personal umbrella insurance policy, you can be better equipped to help safeguard your assets in the face of a personal liability lawsuit. So, what exactly is umbrella insurance, and do you really need it? We’ve broken down the coverage to help you make an informed decision.
First, consider your lifestyle risks
In your personal life, you face risk exposures that can lead to significant financial liabilities.
Personal Liability: Accidents can happen anywhere, and you may find yourself liable for incidents that occur on your property, such as a guest slipping and falling. Umbrella insurance can cover legal fees and settlements that exceed your homeowners' insurance limits.
Automobile Accidents: Despite safe driving habits, you can be involved in serious car accidents that result in significant injuries or damages. If costs surpass your auto insurance coverage, umbrella insurance may cover the excess liability.
Recreational Activities: Owning recreational vehicles like boats or snowmobiles or having recreational activities on your property like swimming pools or trampolines can increase the risk of accidents which may lead to significant financial liabilities.
Defamation, Libel, and Slander: In today’s digital age, social media interactions and public statements can sometimes lead to defamation lawsuits. Umbrella insurance can help cover the legal costs and damages of such claims.
Property Damage: You may face potential claims for accidental damage to others’ property. Umbrella insurance can help cover the cost of damages and associated legal fees.
Umbrella insurance is an essential defense that provides an extra layer of liability coverage beyond your standard homeowners, auto, or other primary personal insurance policies. It helps protect your assets and wealth from the potential financial downfall resulting from such incidents or lawsuits.
Who It’s For
Personal umbrella insurance is beneficial for individuals with significant assets and those who may:
Umbrella insurance acts as an extra safety net, offering financial protection when you're held responsible for an accident or incident exceeding the limits of your primary policies. It can cover unforeseen costs stemming from these incidents, shielding your assets like your home, savings, investments, and future earnings from risk if a substantial liability claim.
For example, if you are involved in a car accident and the victim incurs severe injuries, the limits of your auto insurance policy might run out, leaving you without adequate coverage for your medical expenses and potential legal costs. In such a case, umbrella insurance can provide the additional funds necessary to protect your assets.
How It Works
Personal Umbrella insurance can cover certain incidents that may not be adequately covered by your primary insurance policies.
- It typically includes property damage and bodily injury liability claims, covering costs related to claims if you are found legally responsible for injuring others or damaging their property.
- It also covers personal injury claims like defamation, libel, slander, and privacy invasion.
If a covered incident occurs, you would first file a claim with your primary insurance provider. Once those liability limits are exhausted, your umbrella insurance comes into play. A key advantage of umbrella insurance is the higher liability coverage limits it provides. It's important to note that personal umbrella insurance has limits and may not cover certain exclusions like intentional acts or business-related incidents.
Factors Impacting the Cost
The cost of umbrella insurance is influenced by several factors, including the level of coverage chosen, personal assets, and liability risks. You also can potentially reduce your premiums by increasing your deductible and maintaining a good credit score.
Choosing a Policy
Deciding on an umbrella insurance policy requires consideration of coverage limits, policy exclusions, and claims handling. It’s advisable to speak to a professional risk advisor to help determine the appropriate level of coverage based on your risk profile and lifestyle exposures.
- Coverage limits depend on your current assets and potential lifestyle risks.
- When choosing an insurance provider, seek one with strong financial standing and a proven history of providing reliable coverage.
- Look for a provider that has a history of efficient and effective claims handling
As you evaluate your financial portfolio, consider investing in an umbrella insurance policy as a strategic step to help strengthen your financial resilience, protect your hard-earned assets, and gain peace of mind for the future.
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This article overviews the key aspects of umbrella insurance, explaining what it covers, the factors affecting its cost, and how to select an appropriate policy for your lifestyle exposures. Take a read.
Key Takeaways:
- Understand your lifestyle risks
- Learn how umbrella insurance enhances your primary insurance coverage to safeguard against unexpected personal liability claims or lawsuits
- Get practical tips for choosing an appropriate policy that fits your lifestyle exposures