The Important Insurance Policy Many Physicians Overlook

December 15, 2014

Umbrella coverage is one of my first and strongest recommendations to physician clients. Here's why.

I have encountered many physician families that do not have umbrella liability insurance. It is always one of my first and strongest recommendations. Here are my answers to common questions about umbrella coverage:

What is umbrella coverage?
This insurance adds excess liability coverage on top of your homeowners, automobile, and other general insurance policies. It also may cover occurrences that may or may not be otherwise covered, such as lawsuits for false arrest or slander.

How much does it cost?
It is inexpensive, usually running $200 to $300 per million dollars coverage per year.

Why should I consider it?
Umbrella liability insurance “picks up” where your other policy limits end. For example, you may carry $250,000 in automobile liability coverage. A $2 million umbrella policy would cover your liability above $250,000 and up to $2 million.

In fact, when you buy umbrella insurance, you should fit your home and auto policies to the umbrella terms. The umbrella carrier will always specify a minimum level of coverage on the other policies. However, sometimes you are buying too much underlying coverage and can reduce it when combined with the umbrella policy. I have seen some families add significant umbrella coverage at almost no new net cost annually.

How much umbrella coverage do I need?
Some experts advise that you have enough to cover your assets. Other advice is to cover your expected liabilities.

I follow a general rule to have enough to sleep at night. That’s different for everyone, but I’d suggest $2 million to $5 million usually works for this. Personally, my family jumped to $5 million in coverage when our teenage children began driving, and I’ve never dropped to lower limits.

Note that umbrella coverage will usually not cover your business, especially a medical practice. It may or may not cover rental properties, although I have seen most noncommercial property included in various families’ policies.

Not having a good umbrella liability policy is a mistake. If you don’t have one, call your auto or homeowners agent today and get one.