By: Revanche

When is Umbrella Insurance Appropriate?

May 14, 2008

May is my month of insurance review, and I’ve got a list of insurances to research and revise thanks to my recent re-reading of David Bach’s Smart Women Finish Rich.

Safety
Disability: available through employer, is it portable? We have supplemental policies available, are they portable or worthwhile?
Life: available through employer, again, portable? Should I get another policy separately?
Renter’s: create inventory list of assets in home.

The one insurance that was not included on my list, however, was for umbrella insurance. Off the top of my head, I don’t remember if Bach covered it, but I didn’t list it as an Action Item because I’m not sure where I stand on it.

At what point of wealth or asset-accumulation should I buy umbrella insurance? I’ve got my personal vehicle that’s fully paid for, and some retirement assets, but very little else. Certainly when I buy a home but, before then, it seems a little less clear when umbrella insurance becomes a necessity. Because the point is to protect the value of your assets, as discussed by Free Money Finance, where is a point by which you should consider yourself insurance-worthy? The discussion that follows the post is interesting as the commenters share points or anecdotal experiences that argue for or against getting umbrella insurance when you’ve only modest wealth.

I’m trying to decide what’s appropriate for me and my life, and am not really sure where to begin. My instinct is to say that I’ve got so little that I should just focus on the items in the list above, but my circumstances are somewhat unique in that I don’t have anyone to depend on should any financial or medical disaster occur. Also, if I’m obtaining disability and life insurance separate from the policies administered by my employer, perhaps it would be cheaper overall to buy umbrella insurance bundled with the others?

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