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Are Umbrella Policies Necessary?

2011 May 1

When shopping for home insurance, you’ll likely be asked if you’d like to add on an umbrella policy.. Whether or not this is necessary for you largely depends on the size of your personal assets and net worth – the greater your assets, the higher your risk.  Once you have decided whether an umbrella policy is right for you, it’s time to select your coverage amount. The value of your home is a good place to start in determining this. Your community identity and profession can also play a factor in this decision.  Physicians, for example, often carry higher limits since most people assume that they have more assets, and therefore more insurance – so suits against them tend to be filed at higher amounts. The cost for additional million-dollar layers are also less than the first layer, so the cost of higher limits are an even better value. For most people, a limit in the $1-3 million range would be more than enough unless they have accumulated significant wealth. If someone has a $220,000 home, is in debt with very limited savings, then just carrying $500,000 of personal liability on your home and auto would be a very adequate level, and Dave would recommend using that money now for debt reduction.

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