The Best Umbrella Insurance for Physicians. Lawsuits are, unfortunately, America’s favorite security blanket. These days, it seems like the knee-jerk reaction for every unfortunate event is a lawsuit. Moreover, if there’s anything law and medicine have in common, it’s that both fields are as absolute and precise as can be. Black cannot be white. A dialysis treatment cannot be replaced by chemotherapy. A man guilty of murder is guilty – no ifs and buts. This is why, as a physician, it is important to take all the necessary precautions to safeguard your wealth against any form of lawsuit, as this will surely take a toll on your financial, emotional, and physical well-being, among others.
Lawsuits are perfect examples of money vampires, liabilities that suck the life out of your resources. It’s something you should certainly steer clear of, and this brings us to the question, “What is umbrella insurance and why is it important for physicians like you and me to have one?” Did you know that if someone files a lawsuit against you and you do not have insurance or cash on hand to settle the damages, the person can satisfy the liability through your assets and your investments as well as through your future earnings? Having the best umbrella insurance is an essential (not to mention affordable) first line of defense for when anything happens to go south. It’s a key step to protecting your personal assets from unexpected, unforeseen circumstances.
In this blog, we will discuss all the important answers to “What is umbrella insurance” – why it’s important for physicians like you to have an umbrella insurance policy, what it will entail from your end, and how to best go about it.
When talking about “what is umbrella insurance”, the best way to appreciate its benefits is by understanding where it falls amidst all of the existing insurance plans you may already have. In a nutshell, your umbrella liability insurance takes care of any leftover credits that exceed your primary insurance coverages, although it is very important to note that there are gaps and limitations even the best umbrella insurances have. There is a strategy to work around these limitations and make the most out of the best umbrella insurance available to you.
How you protect yourself via an insurance plan can be split into two major types – personal and business-related. Personal insurance plans are those that protect you as an individual. The following are several types of personal insurance plans that Americans buy:
With regard to your personal insurance plans, the best umbrella insurance is most commonly applied to your Homeowners Insurance and Auto Insurance. So let’s say you get into a car accident and the person you bumped is charging you $2 million for damages. If your Auto Insurance plan only covers $1 million, your umbrella liability insurance covers the remaining balance of $1 million. This is especially important because there are over 11 million car accidents per year in the United States, and it is not uncommon for these accidents to result to lawsuits that cost at least $5 million.
On the other hand, business-related insurance plans are those that protect you as a professional or business entity. You can either get a Business Insurance (one that protects you from lawsuits filed against your business by customers or other industry players) or a Professional Liability Insurance (one that protects your license, privileges, and reputation as a practicing professional, especially applicable for doctors, lawyers, and the like). In business-related insurance, umbrella insurance policies are only applicable to your Business Insurance plan and not your Professional Liability Insurance plan, but there is a roundabout strategy (read on to find out).
In exchange for a very affordable monthly premium, the best umbrella insurance can serve as a second layer of protection for the select few personal and business insurance plans we mentioned above. Having these aforementioned insurance policies is a pre-requisite to availing the best umbrella insurance. While an umbrella insurance policy picks up where your primary insurance plans left off, knowing the right answers to the question “What is umbrella insurance” is crucial because it prevents insurance providers from unnecessarily over-insuring high income earners such as yourself.
As you may have noticed over the course of our discussion so far, the down side to the question “What does umbrella insurance cover” is that there is no dedicated umbrella insurance for your Professional Liability Insurance. Both your Personal Umbrella Insurance and Business Umbrella Insurance do not cover your Professional Liability Insurance per se, but there certainly is a way around it.
As a physician, it’s important to have yourself insured because being in the medicine practice is a delicate, complex responsibility. For example, a patient gets a severe allergic reaction from a medication you prescribed and decides to sue you, a Professional Liability Insurance can literally avert disaster – as in, long-term financial and professional losses – on your behalf. Because even the best umbrella insurances don’t cover your Professional Liability Insurance, the best way to go about matters regarding “what does this insurance cover” is to have your insurance provider add an extra “professionally liability” layer/rider to your Business Umbrella Insurance instead. Of course, this presupposes that you have done due diligence prior and have, in fact, confirmed that your insurance provider is capable of providing that added security measure.
You can acquire the best umbrella insurance that covers professional liability by finding an insurance provider that is able to add a “professional liability rider” clause to your existing Business Umbrella Insurance. Given that your primary Business Insurance provider allows the said inclusion, this secondary umbrella insurance provider will then arrange for that professional liability layer to be added to your primary Business Umbrella Insurance policy.
Apart from having an existing Business Insurance policy, some of the best insurance plans also require a minimum coverage requirement from your primary insurance providers. This is an important detail you must never forget to look into as this is a loophole many physicians succumb to. If your primary insurance policies don’t meet the requirement stipulated by the umbrella insurance provider, you may have to increase your base coverage beforehand. This minimum requirement is a game of pass-the-ball between primary and secondary insurance providers in the hopes of trying to minimize liabilities on their end.
Now that we’ve gotten all the technicalities sorted out, here are invaluable reasons why getting the best insurance is worth your while.
When asked what the best insurance is, the answer varies greatly depending on the object in question. For example, if the object is a 10 year-old car that already has its kinks (let’s say the liabilities were to cost $20,000 upon assessment), getting the best umbrella insurance, which will cost no more than $100 a year, seems like such a great deal, right? Not exactly. The catch is that in order to avail of the best umbrella insurance in question, you must have a basic cover of $300,000 from your primary insurance provider. That’s a thousand-dollar difference from what you would normally pay for an auto insurance policy! As of writing, the annual cost of a $1 million personal umbrella policy ranges from $150 to $300, according to the Insurance Information Institute.
It’s true, there is such a thing as over-insuring yourself and having the right knowledge can definitely prevent that from happening. Before deciding to get the best umbrella insurance, make sure to base it off of your net worth. Subtract protected assets when deciding which umbrella insurance to go with. Did you know that many of your existing assets are protected by law? Cash-value life insurance plans and certain retirement plans, such as 401k’s and profit-sharing plans, are protected from creditors. Some IRAs are also protected from creditors, depending on which state you live in.
Some aspects of your home may also increase the cost of your umbrella liability insurance. These include the following:
With regard to professional liability, the benefits of acquiring the best umbrella insurance are at an all-time high. The question “what does this insurance cover” in terms of your physician profession offer promising results. Having the best insurance can pay for legal defense expenses and even lawsuits involving libel or slander, among a slew of many benefits. Business umbrella insurance policies that are able to cover professional liability usually offer $1 million to $10 million worth of coverage. Again, when deciding how much coverage you should get, it’s best to take your net worth into consideration, a.k.a. how much you can potentially lose in case something unfortunate were to happen. As of 2020, a $1 million umbrella insurance coverage can cost as low as $19 per month, but make sure to carefully study the clauses each insurance provider requires.
For someone who owns significantly high-value assets (which will be such a pain to lose), a medical professional can reap priceless, long-term benefits off of having this insurance policy. As long as you carefully study what each policy entails and how favorable it is in terms of safeguarding your wealth, having this kind of insurance on your side can definitely put you in a much more stable position financially. You never have to lay in bed at night worrying about money vampires as long as you have the best umbrella insurance locked and loaded. It’s a rather small price to pay in exchange for your peace of mind, don’t you think?
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