Umbrella insurance provides extra liability coverage that adds a layer of protection to your other insurance policies. If you’re a high-income earner, such as a physician, carrying umbrella insurance can offer crucial protection for your assets.
While your malpractice policy may provide adequate occupational liability coverage, your other insurance policies probably aren’t substantial enough to cover your assets.
Read on to learn about umbrella insurance for physicians and determine how you can use it to build a comprehensive financial plan that protects all your assets.
What Is Umbrella Insurance?
Also known as personal liability insurance or personal liability coverage, umbrella insurance is a backup insurance plan that kicks in after your other insurance coverage has been paid out.
It typically applies to claims that go beyond your homeowners, renters, watercraft, and auto insurance policy’s liability limits.
If an accident occurs on your premises or because of you, your umbrella insurance policy could provide additional coverage. It also applies to liability claims such as libel and slander.
The policy is different than excess liability protection, which simply increases your coverage in certain areas of your homeowners or other underlying policies.
How Does Umbrella Insurance Work?
Here’s an example of how umbrella insurance works.
If your friend slips on the deck during a pool party at your house or rental property, you could be personally on the hook for their medical bills, unless you have umbrella insurance.
In this scenario, the injured party would file a claim with your homeowner’s insurance company to pay for the costs they incurred. If your home insurance policy limits aren’t enough to offset their expenses, you would file a claim with your umbrella insurance provider.
The individual could also decide to sue you for emotional distress and lost wages in addition to their expenses. Umbrella insurance can also pay for your legal defense costs and extra judgments.
Coverage could also apply if someone is injured on your sailboat and their medical bills exceed your boat insurance coverage limits. Likewise, umbrella insurance could foot the bill if you were liable for damages or injuries in a car accident and the expenses exceeded your car insurance policy.
What Does Umbrella Insurance Cover?
While the specifics can vary from one insurer to the next, umbrella insurance typically covers the following claims:
- Personal property damage
- Bodily injury liability
- Libel, slander, defamation of character
- Landlord liability
- False imprisonment
- Associated legal costs
There are some exclusions. For instance, umbrella insurance doesn’t cover your injuries, damage to your own property or belongings, contractual liability, or damages from intentional or criminal activity.
It’s also important to understand that umbrella insurance doesn’t apply to malpractice claims. Rather than trying to supplement your malpractice coverage with a personal umbrella insurance policy, you should purchase a malpractice policy that will provide adequate occupational liability protection.
How Much Does Umbrella Insurance Cost?
Umbrella insurance is relatively affordable. The average policy costs between $150 and $300 a year for $1 million worth of extra protection.
For less than $25 a month, you get peace of mind knowing that almost nothing could happen to take away your holdings.
Here are a few factors that impact the cost of coverage:
- Insurer: Insurance rates vary from one insurance carrier to the next. When you have multiple policies, like your car insurance and homeowners insurance policy with one company, they may offer you a discount for bundling in umbrella insurance.
- Coverage amount: The premiums you pay will largely depend on how much coverage you buy. The larger the policy, the more you can expect to pay.
- Risk factors: The higher amount of risk you pose to an insurance company, the more your policy will cost. If you have a trampoline, pool, jet skis, or certain breeds of dogs that make you more likely to file a claim, you can expect to pay more for coverage. Having teen drivers can also increase the cost of coverage as they pose a higher risk of getting in a traffic accident and causing damage.
You can get umbrella insurance quotes online or speak with an insurance agent to compare coverage options.
FAQs
Do Physicians Need Umbrella Insurance?
Umbrella coverage can protect physicians from having all their assets liquidated and seized due to a lawsuit or personal injury costs.
This type of insurance makes sense when you start to accumulate things you can’t afford to lose. A thorough policy will cover all your properties, vehicles, boats, retirement accounts, and limited partnerships or LLCs.
Some argue that instead of paying an insurance company a premium every month for umbrella coverage, you should self-insure. Self-insurance requires you to have enough cash in liquid savings to cover any kind of lawsuit or other catastrophes by writing a check.
An example of being self-insured is canceling your collision and comprehensive coverage and trying to save enough to cover the cost of a new car on your own.
When it comes to purchasing umbrella insurance as a doctor, having enough liquid savings to cover all your assets is more challenging. In most cases, it’s more financially sound to pay a small insurance premium every month than to try to cover all your bases.
How Much Umbrella Insurance Do Doctors Need?
The right amount of umbrella insurance for you depends on your assets and net worth.
Generally speaking, doctors make more money than the average person, and they have more assets to protect. As such, they need more substantial amounts of umbrella insurance coverage.
A good rule of thumb is to purchase a coverage amount that at least equals your total assets. Ideally, you should buy enough to cover legal fees as well as protect your assets.
On average, doctors purchase $1 million-$5 million of umbrella insurance to provide additional liability coverage and protect themselves from legal claims.
When Should Physicians Buy Umbrella Insurance?
With most insurance products, it’s best to get a policy as soon as possible.
If you’re still in medical school, you may be tempted to hold off on purchasing umbrella insurance and rely on your auto, homeowners, or renters insurance to protect you until you’re making more money.
However, you should keep in mind that accidents can happy any time and you could be left to foot large bills before your residency.
Since umbrella insurance is so affordable, it’s wise for physicians to purchase a policy as soon as they can. Remember that you can always increase your coverage amount later as your wealth increases.
How do I Buy Umbrella Insurance?
Buying umbrella insurance is a simple and straightforward process. Most major insurance companies sell umbrella policies and allow you to easily compare coverage information online.
Insurance companies typically require you to carry a certain amount of liability coverage on your home and auto policies before issuing an umbrella policy.
Many companies only provide umbrella policies to customers who have homeowners, renters, condo, or auto insurance with them already. However, some insurance carriers sell standalone umbrella policies.
Before you sign up for umbrella coverage, compare the policies you find and ask about any loopholes, exemptions, or restrictions. Do your research thoroughly before signing up.
