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The Best Umbrella Insurance for Physicians


September 19, 2020

Harsha Moole, M.D., MBBS


“Avoid lawsuits beyond all things; they pervert your conscience, impair your health, and dissipate your property.” Mark Twain

 

Discovering the Wonders of Umbrella Liability Insurance and How it Can Protect You as a Physician

Introduction | What Does This Insurance Cover? Well, First and Foremost, Lawsuits!

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.

 

What is Umbrella Insurance?

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:

  • Health Insurance – Depending on what type of plan you choose, your health insurance covers incurred health expenses that range anywhere from lab procedures and other in-patient amenities, out-patient services, and hospitalization expenses.
  • Homeowners Insurance or Rental Insurance – Any home-related lawsuit can take away your home from you and the goal of having homeowners insurance or rental insurance is to protect your assets, especially the home where you reside, given that it’s one of your most important assets in life.
  • Auto Insurance – Having auto insurance is a vital aspect of owning a car. It protects you from any untoward accidents on the road that could cost you a lot of money.
  • Disability Insurance – In the event that you are deemed disabled due to, say, an illness or an accident, having disability insurance will provide you with a bare minimum allowance to cover your monthly expenses, such as rent, groceries, and the like.
  • Long-Term Care Insurance – This type of insurance is especially made for retired individuals and senior citizens. The premiums are paid to an insurance company so that when the time comes and you need to avail of long term care services, your insurance company will fund your expenses for long term care (accommodation, prepare your meals and provide you with the personal care you need).

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.

 

Identifying the Best Umbrella Insurance for Physicians

Our Take on the Best Insurance for Physicians

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.

 

Why It’s Important to Get the Best Umbrella Insurance

Now that we’ve gotten all the technicalities sorted out, here are invaluable reasons why getting the best insurance is worth your while.

  • You get an added layer of security for a fraction of the cost.
    • Because the best umbrella insurance policies are the cheapest forms of insurance, the cost alone is definitely a major perk for physicians like you. Of course, the sum total expenses that come with getting the best umbrella insurance goes far beyond the actual umbrella insurance policy alone – case in point, the minimum coverage requirement we just discussed. It’s important to weigh the object you are insuring vs. the total insurance cost to be incurred. We will expound on this further in the next section of this blog.
  • It protects your wealth, your assets, and your family from resource-draining lawsuits.
    • It truly is a wise decision to take all the precautionary measures to preserve your wealth and your assets. The reason here is that bulk of your family’s stability and your own financial security are rooted on these said assets (i.e. your home, your investments which provide you monthly cash flow) so it’s best to protect them at all costs.
  • It keeps all of your hard work as a physician secure and intact.
    • Having the best umbrella insurance under your belt is considered to be a prized asset protection vehicle. The journey is long and difficult for physicians – that’s a fact. This is why it is so important to safeguard what you have worked so hard for. If you think about it, your profession as a physician is also considered a valuable asset and the best umbrella insurance will protect your life’s work from unfortunate incidents, such as medical malpractice lawsuits and the like.

 

The Cost, Coverage, and Impact of Having Umbrella Liability Insurance

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:

  • Homes that are used for commercial purposes (such as business)
  • Homes that have swimming pools, trampolines, and pets (as these can potentially increase the risk of damage within the home)

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.

 

Summary | What Does This Insurance Cover? Peace of Mind, More than Anything

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?

Best Umbrella Insurance

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Legal Disclaimer: This is not investment advice. I am not a legal and/or investment advisor. This is my personal blog, and all information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. These are my views, it is not a production of my employer, nor is it affiliated with any broker/dealer or registered investment advisor. While the information provided is believed to be accurate, it may include errors or inaccuracies. To the maximum extent permitted by law, PhysicianEstate disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. You should consult with an attorney or other professional to determine what may be best for your individual needs. Your use of the information on the website or materials linked from the Web is at your own risk. 

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Authored by Harsha Moole, M.D., MBBS

Hey there! I hope you enjoyed reading this blog. PhysicianEstate is my brain child and passion project. I run this platform to empower entrepreneurially motivated physicians to make financially educated investment decisions and discuss asset protection strategies. Lots of important but free content here and here! If you have any questions or if you are interested in partnering with me, let’s connect! hmoole@physicianestate.com

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