Protecting Your Assets and Future Earnings – The Umbrella Policy

June 20, 2013

By Lauren Law, Financial Advisor

To get from my office to my favorite lunch spot, I have to drive about 5 minutes down one of Nashville’s busiest streets. One afternoon last spring, I was making the drive I have made many times before, but traffic was moving so slowly! I soon noticed flashing police lights a few cars ahead of me and changed lanes to avoid the stopped cars in the middle of road. Of course, I craned my neck to see what was going on – thankfully it was nothing but a simple fender bender. Even so, my heart skipped a beat when I saw the man standing outside of the car that had bumped into the other – he was wearing blue scrubs and his Vanderbilt ID badge on his hip.

What are you thinking right now? If you’re like me, you’re thinking you hope he has an umbrella policy, just in case the “victim” wants to sue. An umbrella policy is a separate policy purchased from your home and auto insurance company that simply provides added liability protection on top of your base coverage. Most auto policies that I see have liability limits of either $300k or $500k – that is how much the insurance company would pay on your behalf to satisfy a liability claim. Add a $1 million umbrella policy, and now your liability limits are $1.3 million or $1.5 million, respectively. The best part? The cost is around $200/year for a $1 million policy.

So what happens if the doctor in my story does not have an umbrella policy and a judgment was made against him? He could actually be on the hook not only for his assets, but also for his future wages! For all of you that are in training still, this would wreck your financial future. You need those future earnings to make payments on student loans, pay the mortgage, save for retirement, etc. I cannot stress enough how important it is to get this umbrella policy. Then as your income and assets continue to increase, you want to be sure that your umbrella policy is being increased as well. I have established physicians carrying $5 million umbrellas just to protect themselves.

I used the example above of a car, but the umbrella policy would also extend over your home, and you want to be sure that it extends over any rental properties you own as well. I have a lot of clients now that couldn’t sell the house they bought in residency, so they maintain that house as a rental. You have no idea what your renters are doing or who they are inviting over, and as the owner of the home you are on the hook liability-wise for any accidents that occur there. Being a physician has its perks, but you have a target painted on your back for those looking for a quick payday. In my opinion, the $20/mo you will spend on your umbrella policy is some of the best money you will ever spend. If you do not currently have an umbrella policy, call your home and auto insurance company today to get that set up.

As always, if you have any questions, I’m available at