Umbrella policy quick tip.

As an estate planning attorney I often get asked questions about asset protection. Particularly when it comes to ensuring rental homes and second homes.

Should I use an asset protection trust?

Should I create an LLC?

For most people, those structures are not necessary.

For most people, an umbrella policy will do the job (NOTE: don’t just run off and do this. Let’s chat first to make sure you’re doing the right thing.)

An umbrella policy is a specific type of insurance policy that acts like an umbrella over all of your assets.

If something should happen that exhausts the insurance you have on any particular item, the umbrella policy kicks in to make up the difference.

For example, let’s say you have a rental house. Your renter seems amazing, but in reality he’s a meth cook. He blows up your house and the two houses next to your house, killing 3 people.

Whether or not you have any liability isn’t important right here, right now. The key is that your home owner’s insurance policy isn’t going to cover it if you are.

So the umbrella kicks in…

IF YOU HAVE IT SET UP RIGHT.

Whenever you purchase an umbrella policy you MUST make sure any real estate you have is specifically covered under the policy. It needs to be called out for it to be included (most of the time).

Bottom line – make sure when you are acquiring your umbrella policy you tell your insurer what it’s for and what you want to cover so it actually works the way that you want.

Cheers,

Christopher Small
Estate Planning Attorney

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