Insurance Guidance To Help You Protect What You Value

Like most people, you probably already pay for many different kinds of insurance coverage, and as the terminology is pretty straightforward, it’s easy to know which type applies to which situation.

For example, you know that an auto insurance policy covers your car, homeowners insurance covers your house, life insurance covers you in case of death, and health insurance will cover your bills should you become ill. There’s even flood insurance to recover losses due to flooding.

While all of these policies help protect your assets and finances in the event of an accident or natural disaster, they do come with a liability limit. If a claim exceeds this amount, you might be left to pay the rest out of pocket.

That’s where umbrella insurance comes in.

An umbrella policy, also known as excess liability insurance, offers extra protection for times when your regular coverage limit falls short of a claim.

To better illustrate how this additional personal liability coverage works, take, for example, the following story.

While driving in a grocery store parking lot, a woman accidentally hit a pedestrian with her car. The woman who was struck survived but suffered significant injuries.

The woman who’d been driving felt terrible about the incident. She was also worried that she now faced a costly lawsuit over a liability claim. With life savings of about $1 million, she feared that she’d lose it all if a judge demanded that she pay the victim’s medical bills and damages for the victim’s pain and suffering.

She had an auto policy, but the coverage limit was $500,000. Due to the severity of the victim’s injuries, the lawsuit was certain to seek more than that – placing the driver’s life savings at risk.

Fortunately, she had personal umbrella insurance. It cost a couple of hundred dollars each year – and it provided her with an additional $1 million of coverage beyond her car insurance.

Thanks to the excess liability coverage, her insurance company handled the whole transaction. The insurer paid all the legal fees, as well as the claim (in full), allowing the woman to keep her life savings. And she had peace of mind knowing that the victim received all the money she needed.

If you don’t have a personal umbrella policy, your life savings may be at risk due to unexpected, unforeseen, unpredictable and unintentional acts that cause damage or harm to others or their property.

The short answer: a lot of things your regular insurance policies don’t. Think of it this way, when you go out in the rain, a hat protects your head, gloves protect your hands, and boots protect your feet, but you still use an umbrella for overall protection. Hence the name umbrella insurance.

While policies vary, they typically cover you and other household family members against lawsuits pertaining to:

• Damages to someone else’s property
• Injuries inflicted on another person
• Libel, slander and defamation
• Malicious prosecution and false imprisonment

And in a world where you can sue and win over seemingly trivial incidents, you should consider getting umbrella insurance for liability protection.

A simple, inexpensive and easy-to-get umbrella insurance policy could save you millions of dollars – and a lot of heartache. Its purpose is to provide extra coverage beyond the limits of your existing insurance policies. However, if you’ve ever been caught in a torrential downpour, you know that umbrellas don’t always cover everything.

While extra liability coverage offers extra protection for injuries or damages to others, it doesn’t cover your own medical bills, car repairs or any other damage to your personal property. These costs are typically covered by your health or car insurance.

If you own a business, a personal umbrella policy won’t cover any of its liability. For this, you’ll need a separate business policy. Personal umbrella insurance also tends to exclude boats and other watercraft unless you already have boat insurance in the underlying policy.

In addition to personal injuries and property damage, these policies won’t cover liability related to criminal activity or a breach in contract.

Despite the gaps in umbrella insurance coverage, these policies offer a vital layer of protection against potential lawsuits. 

But before you go searching for a policy, there are a few things you should know:

• An umbrella policy provides extra insurance coverage beyond your existing auto and homeowners policies. That’s why they call it an umbrella policy – it covers pretty much anything that might go wrong.
• An umbrella liability policy is not expensive. A $1 million policy costs a few hundred dollars a year.
• Umbrella insurance is usually available only from your auto or homeowners insurer, as your current insurer is already liable for your claims, so it is more willing to add umbrella coverage. However, there are some exceptions to this (more on that in a minute).
• The lowest premium doesn’t necessarily indicate the best policy. If you’re paying less, you’re likely getting a policy with fewer benefits or more exclusions.
• Make sure you understand the coverage you’re getting. Your policy’s declarations page summarizes the coverage, but it’s best to read the entire policy.

At this point, you’re likely wondering how much umbrella liability insurance costs. Fortunately, a policy really isn’t all that expensive. A $1 million policy only costs a few hundred dollars a year. This high liability limit and low cost provides additional value – but there’s a small catch.

Generally speaking, your insurance company can require you to upgrade your current policies to the maximum coverage level before you can purchase umbrella insurance. If you’re considering buying an umbrella policy, be sure to keep these added costs in mind. On the other hand, if you’re already paying for the max coverage, you won’t have to worry about the added costs.

While everyone needs to have an auto insurance policy if they drive, you aren’t legally required to own an umbrella policy. So, why pay for the extra protection? Well, if you own a lot of assets or you’re at a greater risk of getting sued, the extra liability insurance might be worth it to prevent potential losses.

These risks can include things like:

• Owning significant assets of high value
• Accidents while traveling outside of the U.S.
• Property that has a high chance of injuries, including firearms, pools, trampolines and more
• Having a student driver in your household

Of course, the list doesn’t end there – but if any of these are true for you, it might be worth buying additional coverage.

Your coverage should be one to five times the value of your home. For example, if you own a $2 million house, buy an umbrella liability policy that provides $2 million to $10 million of coverage.

If you have a swimming pool, own a boat, have kids or entertain at home frequently, you may have higher risk and should consider additional amounts.

For example, everyone enjoys a party, but have you considered the potential consequences you might experience as a homeowner and host if an accident were to occur?

The following scenarios are not uncommon at parties:

• Someone is injured in a fall and requires medical attention.
• A guest suffers from food poisoning or an allergic reaction to the meal you serve.
• Somebody drinks too much and causes an auto accident on the way home.
• A fight breaks out and one or more people are injured.

But with a comprehensive umbrella insurance policy, you could be protected if you were sued.

In our experience, the vast majority of consumers buy umbrella liability coverage from their home and auto insurance carriers. This is wise because doing so might get you discounts on other policies, and it’s more convenient when paying. You’re also more likely to have a better experience if you ever have to file a claim.

That said, there are indeed situations where an umbrella policy from a separate insurer is best. For example:

• You own lots of real estate. Most carriers won’t extend their umbrella coverage to more than a few property locations.
• Your real estate is held in a trust or LLC (limited liability company). If so, you might need a policy from a company offering a “specialty umbrella” policy.
• You or a household member has a bad driving record. Most insurers won’t provide an umbrella policy if you or your teenagers have had too many tickets/accidents or a DUI.
• You operate a business from your home. Homeowner policies don’t generally cover losses due to business activities, and neither do their umbrella policies. So business owners working from home need a separate policy.
• You need a lot of coverage. Many insurers won’t cover you for more than $5 million. If you need more, you may have to go elsewhere.

Once you get an umbrella policy, make sure to check in with your homeowners insurance company to determine whether your coverage level is up to date. And it never hurts to shop around every few years to see if you might be able to lower your rates with another carrier.

Without the right insurance coverage, you could be leaving your property and assets exposed to unnecessary risks. At Synergy Advisors, we work with clients to help protect them against the unexpected by guiding them through comprehensive insurance strategies.

As part of our integrated wealth management approach, we’ll help you understand what you may need to consider while helping you stay on track with your goals. We recommend you review any liability insurance needs with your property and casualty insurance agent.

Reach out to one of our financial planners today to see how you can build, grow, protect and preserve your wealth.

While insurance may not be exciting, it is important. Looking at the expensive premiums and complicated policies, it can be tempting to forgo buying insurance. With a different type of insurance policy for everything, it is easy to think you’ll never need the coverage. But sometimes, disaster strikes when you least expect it, and to avoid significant financial hardships, you’re going to need insurance.

At the same time, not every insurance policy is worth the premium payments – especially when there’s overlap with your existing plans or little likelihood of the specific circumstances it covers. So, which policies do you actually need for financial protection, and which ones will cost you more in the long term?

To help you obtain comprehensive coverage without excessive costs, here are the types of insurance you do and don’t need:

While health insurance has become increasingly complicated over the last few years, it’s essential. An unexpected medical event can cause severe financial issues and even lead to potential bankruptcy. And as inflation rises, so do medical expenses, with a significant uptick of 3.1% in January 2023. 

Having a health insurance plan in place can not only protect you from potential financial loss due to an emergency, but it can also save you money on routine checkups.

There are many forms of life insurance, but the most basic and least expensive is term life insurance. This pays beneficiaries a specific amount of money if you die within the time period set in the policy.

In contrast to term insurance, there’s also permanent life insurance, which is designed to last for as long as you live, provided you continually make the premium payments.

Individuals should purchase life insurance based on their specific needs. For instance, someone with minors might need to purchase a higher amount of coverage to help ensure their children’s upbringing costs are covered in the event of their death.

Disability insurance replaces a portion of your salary if you became temporarily or permanently disabled. While you might not think it’s important to consider, around 25% of today’s young workers will become disabled before the age of 67. 

Meanwhile, 35% of the private sector workforce has no disability insurance policy in place. 

There are a lot of nuances to this type of insurance regarding when you’d be able to receive compensation and under what circumstances. Make sure you’ve done your due diligence prior to purchasing.

As many as 70% of people aged 65 and older will need some kind of long-term care in their life. 

Yet, the average annual cost of a private room in a nursing home in the United States is $108,405 and is expected to jump to $141,444 by 2030. 

Will you be able to afford this? Long-term care insurance is intended to help cover the cost of care received for home care, or in facilities like assisted living and nursing homes. When deciding between policies, look at the assets you have outside the insurance that could possibly pay for your care. Of course, you don’t want long-term care expenses eating into your retirement funds.

Your home might be the biggest purchase you’ll ever make – don’t you want to protect it? Homeowners insurance pays for damage to your house and often provides the necessary funds for temporary accommodations while your home is being repaired. A homeowners policy will be required while you have a mortgage, but it’s still important to maintain once your home is paid for.

This coverage extends the liability protection provided on your “underlying policies,” like homeowners and auto insurance. You can purchase additional coverage in million-dollar increments.

Approximately 5.25 million car crashes occur in the U.S. each year, according to recent data.5Accidents happen, and it’s crucial to have car insurance for when they do. Beyond just collision coverage for your vehicle, auto insurance should also pay for the other party’s damage in the event of an accident for which you’re found to be at fault.

When you’re buying a house, if your down payment is less than 5% (sometimes, less than 20%), you’ll often be required to purchase private mortgage insurance. If you fail to make your payments, the policy pays it off – but it pays the lender to protect it against risks, not you or your family. Even when you’re paying your mortgage on time, the PMI premium payments, which can cost hundreds of dollars per month, can be a drain on your wallet. Once you have 20% equity paid into your home, ask your lender to cancel this insurance.

If you die, this policy pays off your remaining mortgage balance. Unfortunately, the money goes to your lender, not your surviving family. The premiums are also high. Consider replacing this policy with a term life policy and name your spouse or children as the beneficiary.

You might think you’ve never bought a flight insurance policy when you purchased an airline ticket, but check with your credit card company. Some flights automatically bill you for the coverage when you buy a plane ticket. Even without this coverage, if you die in an accident, the airline is likely to compensate your family regardless of this additional cost. But that’s not the point. Your life insurance policy should have enough coverage to provide for your family no matter your cause of death.

Unless your life is a Buster Keaton physical comedy, a deadly accident isn’t likely. Your home, life and auto insurance coverage should already protect you and your family from a financial loss due to a catastrophe like a car accident or fire; so your family likely doesn’t need more money because you die in an accident instead of an illness. And that’s not to mention the difficulty of proving that you died of an accident – and not a heart attack from stress following the accident.

Even if you have a family history of diseases, insurance policies designed to cover specific things, like cancer or heart disease, are rarely worth the extra costs in premiums. Similar to the above, you’ll want life and health insurance that pays, regardless of the diagnosis.

If you die, this insurance pays off your credit cards. While this might sound like a good thing to do for any surviving family members, credit insurance is extremely expensive and not recommended. Besides, you’re not supposed to carry balances from month to month. Even if you do, cards in your name don’t automatically become the obligation of your survivors. And if you fear they’ll become their obligation, get term life insurance, which is less expensive.

Don’t let the hefty premium payments and complicated policies deter you – some insurance plans are necessary to help mitigate financial issues following an unplanned event. At the same time, don’t let the anxiety of unforeseen challenges pressure you into buying unnecessary policies that could be covered by broader plans that can benefit you more in the long run. Get the facts. Understand your options and choose the best types of insurance policies for you and your family.

At Synergy Advisors, we help our clients manage risks with comprehensive, integrated insurance planning strategies designed to safeguard what’s most important without draining your wealth. We can tailor each financial plan to your specific needs and assets so you can rest easy knowing, no matter what, you have a plan in place.

To help you maximize protection, we use an integrated wealth management approach that takes into account things like investments, taxes, insurance, retirement planning and estate planning. By providing guidance on all of these elements together, we can create a cohesive view of your finances to identify new opportunities to help build, grow, protect and preserve your wealth and your family.

Reach out to a financial planner today to see how you can prepare for risks at every turn.

1. Bureau of Labor Statistics. (March 14, 2023). Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by expenditure category. Retrieved on March 23, 2023, from https://www.bls.gov/news.release/cpi.t01.htm

2. Social Security Administration. (2023). Social Security Fact Sheet. Retrieved March 23, 2023, from https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

3. Cross River Therapy. (2023, February 2). Long-Term Care/Nursing Home Statistics (2023). Retrieved on March 23, 2023, from https://www.crossrivertherapy.com/long-term-care-statistics

4. Senior Living. (2023, March 22). Nursing Home Costs in 2023. Retrieved on March 22, 2023, from https://www.seniorliving.org/nursing-homes/costs/

5. Bureau of Transportation Statistics. (2021). Motor Vehicle Safety Data. Retrieved March 22, 2023, from https://www.bts.gov/content/motor-vehicle-safety-data

 You may have questions like do you need life insurance (if you have people financially dependent on you, yes) and how big a policy should you get (your annual income times the number of years until retirement). In this article, we’ll cover how to select your policy and how much you can expect to pay.

Generally speaking, there are two categories of life insurance: Permanent and Term. As the name indicates, permanent life insurance (like Whole Life or Universal Life) creates a death benefit that can be available all the way to age 100 and beyond. Term life insurance, on the other hand, is used to provide death benefit protection for a period of time (aka the “Term”). Common term policies provide level coverage for 10, 20 or 30 years. There are some circumstances where permanent coverage is essential, like covering estate taxes or funding a Special Needs Trust, but the vast majority of families only need life insurance protection to replace lost income during the time they’re raising kids, or until they reach retirement. Term Life is far more affordable than permanent life, and is the best fit for family protection.

Term Life in most cases is affordable, and you can purchase a policy for a specific amount of time.

Policies are available for different amounts of time (like 10 or 30 years, for example), and there is never a penalty for canceling the policy midterm.

The cost will vary depending on what risk (or underwriting) class you fall into. For example, someone in excellent health may be classed in the “Super Preferred” category, while someone might be in the “Preferred” class if they’re taking one medication or the “Standard” category if they are taking multiple medications. Other details like your height and weight, your driving record, and hazardous occupations or hobbies can also play a role. The terms for different underwriting classes may be slightly different among carriers. The categories are broken down further by whether or not someone is a tobacco user.

Fortunately, consumer protections are in place in each state to help. Regulations require carriers to file the premium with the state and prohibit them from selling it at a different premium. In other words, the same policy with a specific insurance company – based on the same coverage details and the same underwriting class (such as “Preferred Non-Tobacco”) – will cost the same, regardless of who you purchase it from. There are no discounts, sales or deals.

You can purchase a policy from an agent, a broker, or in some cases directly from the carrier. Our recommended approach is to use a broker who can show you quotes from multiple carriers, to help you find the most competitive option.

When you apply for a life insurance policy, you will complete an application that provides some medical information for the carrier to determine your underwriting category. You may need to go for a physical with your own doctor, but in most cases, the carrier will have a nurse practitioner come to your home to do an exam and send your samples to a lab. After processing, the lab sends the results to the carrier, who in many cases may also request additional information from your primary care doctor or other medical providers. They will use the information to determine which risk category you’re in – and consequently, your premium.

Once you have a policy in place, there is very little follow-up service required. You’ll need to inform the carrier if you move, if you need to change your premium payment details, or to request the appropriate form if you need to change your beneficiaries.

Life insurance is an essential part of an integrated financial strategy because it can help safeguard your family’s future.