Ralph: Do you know, if your insurance coverage is enough to protect your assets in a worst case scenario?
Well, let's talk about that today.
We're going to specifically talk about umbrella insurance policies.
And if you need one to protect your personal assets.
Welcome to the Ask Ralph Podcast, where listening to an experienced financial professional with over 30 years of experience can help you make sense of confusing questions, current headlines, and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting.
Ask Ralph makes the complex simple by sharing his real world knowledge from a Christian perspective with all things financial.
Now here's your host, Ralph Estep,, Jr.
Ralph: Welcome to our Saturday show.
I'm so glad you chose to join us.
I just want to thank you for listening and supporting the program.
I'm coming to you as normal from the Estep farm and the beautiful Saggio Accounting studio.
Let me put on my podcaster hat and put down those overalls and let's move that adding machine to the side this morning, and let's get into some financial wisdom from a Christian perspective.
Today, we're going to do a deep dive into umbrella insurance policies.
And no, these are not insurance policies to protect you when it rains.
We're going to discuss what they are.
Who needs them and whether they align with biblical financial principles.
Most of us insure our homes.
We insure our cars.
And we have health insurance because we understand the importance of managing risk, but what happens when a serious accident leads to damage or lawsuits that exceed our normal policy limits?
The truth is folks.
Our assets could be at risk if we don't have additional liability coverage in place.
That's where umbrella insurance policies come in handy.
Don't forget to subscribe to the show and join our email list.
You do that at askralphpodcast.com . You don't want to miss tomorrow's show tomorrow's our spiritual Sunday show.
And we're going to talk about living in gratitude.
That's something we can all learn from so I'm going to, encourage you to make sure you tune in for tomorrow.
Show living in gratitude.
Well, let's start with today's Bible verse.
It comes to us from the book of Proverbs chapter 27, verse 12, and it says this.
The prudent, see danger and take refuge, but the simple keep going and pay the penalty.
I thought that was a great one.
When we talk about insurance.
Just as wisdom teaches us to prepare and protect ourselves from physical danger.
Having proper insurance coverage protects us financially.
When the unexpected arrives and my friends, if you've lived any amount of time in this world, You know, we are always faced with unexpected situations.
So let's start with a basic question.
And that's Ralph, what is umbrella insurance?
And as I said, it has nothing to do with the weather.
An umbrella insurance policy provides additional liability coverage beyond what's included in your normal homeowners in your renters, your auto or your watercraft insurance.
It protects your assets like investment properties, savings accounts, or retirement funds.
When you're found legally responsible for causing bodily injury, maybe you've been found guilty of property damage or personal injury caused to another person.
For example, here's one we can talk about.
If you accidentally injured someone in a car accident.
And they sue you further medical bills and loss of wages.
And if that amount of the lawsuit that's given to them exceed your auto limit policy.
And listen folks.
Most people's auto limit policy is only $300,000.
So once you reach that, then they're going to come after you personally.
Well, this is where umbrella policy step in a coverage helps pay for those damages.
So your assets stay protected.
So if someone was to sue you and you only had that $300,000 policy limit.
If the court or a judge or a jury, awards them more than that, guess what?
You may have to sell your home.
They may be able to go after your personal assets.
Now I'm not an attorney and I don't play one on TV.
I'm not giving you legal advice, but this is the whole point of an umbrella policy.
It kicks in.
Once you reach that maximum limit on your policy.
So now that we know what an umbrella policy is, let's talk about who needs these insurance policies?
Here's the deal.
Folks, umbrella insurance is recommended for high net worth individuals with substantial assets to protect.
Well, you might say Ralph.
Maybe I'm not a high worth individual, but here's the thing I'm going to add to that.
It also provides extra coverage.
If you engage in activities with increased liability risks, like those things could be something such as teenage drivers.
If you have a home rental or if you own any watercraft.
So it's not just if you're a high net worth individual, but if you have any risks, like teenage drivers, a lot of us have gone through that.
I know I went through that with my two boys.
Maybe you rent a home or you rent multiple homes or you own a boat or some other kind of watercraft.
As a general rule of thumb, if your net worth exceeds $500,000 not counting your home's value, umbrella coverage is a wise idea.
Or if you own multiple properties that you rent out, having that umbrella policy gives rental property owner, significant peace of mind.
This is something I recommend for all of my clients who own rental properties.
So now let's cover the benefits.
Of these umbrella insurance policies.
And the first one is the biggest one.
It protects your assets.
With an umbrella policy, your assets like investment accounts retirement.
accounts savings and college funds are shielded.
If you ever need to pay out a large settlement, they can't touch them because your umbrella policy is going to take the place and cover up to that new amount over and above your normal limit.
Number two, it provides higher liability coverage.
That's exactly what you were talking about.
Umbrella policies generally provide between 1 million to $5 million in additional coverage above your other insurance policies.
Some go as high as 10 to 15 million.
So let's talk about a real life example.
Actually had this happen.
Many many years ago to someone I knew pretty closely.
One of my former clients, they actually had a cleaning person that came to their house and it was the winter months.
Well, this cleaning person decided to walk across the sidewalk that they hadn't cleared yet from snow.
And they slipped and fell.
And they did have some significant injuries.
Well, here's the deal folks.
The insurance company for their homeowners policy only went up to $300,000.
Well, this particular individual went to court and was awarded $750,000.
Now, in this particular case, this person did not have an umbrella policy.
So they ended up going over and above their insurance limit and they had to scramble and find ways to pay that they ended up losing their home.
So, this is where an umbrella policy would have protected them.
So let's look at that same scenario over again.
Had they had that umbrella policy, let's just say for a million dollars, they wouldn't have had to come out of pocket with anything.
Because once they met that $300,000 limit for their home policy, then the umbrella policy would have kicked in and paid the difference.
So let's move on to number three.
And this one is huge.
It also covers legal fees.
If you ever need to defend yourself in court due to a liability lawsuit against you, attorney fees often exceed damages.
In other words, the insurance companies might say, listen, we're going to go ahead and settle for that 300,000, because that's the most we're going to have to pay anyway.
But guess what?
Then folks you're left holding the bag for those attorney fees.
Umbrella insurance handles both damages and legal costs up to that limit.
Let's look at number four and that's affordable additional protection.
Here's the truth.
I was shocked when I actually bought one of these myself umbrella policies are reasonably priced for the additional coverage amounts provided.
Here's the truth policies start around $150 to $300 per year on average for a million dollars in coverage.
Think about that $50 a month or maybe $30 a month over the year.
And you can get up to a million dollars in coverage.
And listen, here's the truth.
As with anything, there are potential drawbacks to consider when purchasing umbrella insurance.
let's start by saying it.
No insurance product is perfect though.
Here are a couple of aspects to weigh in.
Number one.
It doesn't cover every situation.
Umbrella protection applies to personal liability.
It doesn't cover damage to your own assets and some policies have exclusions like auto collision coverage.
So you want to make sure you understand the fine print.
Number two, there is greater insurer scrutiny.
due to the high coverage limits insurers, thoroughly vet applicants, reviewing driving records.
They look at your violation history and more, which can be tedious.
So it might take a little bit more to get this insurance.
So you might ask Ralph does this type of insurance align with biblical financial principles.
And the simple answer is absolutely it does.
Having appropriate insurance aligns with biblical wisdom on managing risk responsibly.
The book of Ecclesiastes chapter 11 verse two says invest in seven ventures.
Yes.
In eight.
You don't know what disaster may come upon the land.
Just as we diversify investments, having umbrella coverage, diversifies our protection in the event of a financial disaster and by shielding our hard-earned assets, we eliminate a stressful burden, which scripture advises us against in Matthew 6:25.
And I encourage you to go read that.
So now that we've considered the pros and cons of these policies, let's move on to some action steps, some action items that you can take.
The first step is to find an umbrella policy that fits your needs.
Well, how do you do that?
Here's what I recommend.
I recommend connecting with a knowledgeable insurance agent to discuss needs before picking a coverage amount.
You need to talk to them about your assets, the properties that you own, the cars you have, the boats and other liability exposures.
To customize the right policy.
I would highly recommend you start with your auto carrier or with your homeowners insurance and ask them if they offer these umbrella policies.
Then they'll be able to compare options from top providers for the best fit.
You need to assess if your liability risk warrant, extra coverage above the existing policies.
As we talked about, we use that standard rule of 500,000 net worth, or if you have rental properties and that's when you decide if umbrella protection brings value, peace of mind.
If so calculate potential costs based on a 1 million to $5 million policy,
And finally discuss options with an agent to secure the right umbrella policy for your situation.
Now, before we wrap up on remind all of our listeners to visit our podcast page.
You do that at askralphpodcast.com there you can leave a review, share your thoughts, or even send us a message with questions for future episodes.
We're starting to get some of those.
So I encourage you to do that while you're there.
Make sure you join our email list so we can send you our daily email with what's going on with this show.
You can also schedule a consultation.
Me, if you have some specific items that you want to talk about, and here's what I'm going to ask you to do.
If you know someone who may need this type of insurance coverage.
I asked you to share this with them.
I also ask you to share the show with all of your family and friends.
The truth is folks.
If each person will share it with just one person, we'll be able to double our listeners and reach more people with a positive message of how to master their finances and their life from a Christian perspective.
So let's do a quick recap.
On today's show we defined what umbrella policy is and why higher net worth individuals may opt for extra liability coverage.
We highlighted the value umbrella policies provide in defending your assets in the event of a serious accident or lawsuit or rental property exposure beyond your normal policy limits.
And we covered who generally needs it most plus weighed the advantages against a few potential disadvantages.
Now, listen, most importantly, we connected prudent umbrella insurance to biblically based financial wisdom.
And that's my goal in every program is how do we tie the finance and the faith together?
In closing.
I pray.
The wisdom shared today gives you confidence in safeguarding, your hard work As first Timothy chapter five, verse eight, reminds us anyone who does not provide for their relatives.
And especially for their own household.
Has denied the faith and is worse than an unbeliever.
Wow.
That's harsh.
But that's from the Bible folks.
Let's continue making every effort to protect our livelihoods, through proper coverage.
And as I always say, stay financially savvy my friends and may God bless you.
Enjoy your Saturday.