Bob's Blasts

May, 2019

Umbrella Policies

Most of us have auto insurance to protect our car and homeowner’s insurance to protect our homes and the belongings in it against theft or damage.  Auto and homeowner’s insurance also provide liability coverage to protect in case you were deemed at fault in an accident.  One potential risk to be aware of are the limits of liability in these policies.  Many policies limit liability damages to $100,000 - $500,000.   While this may be enough to cover most minor claims, it may not be enough in the case of a severe or catastrophic loss.  

Imagine a scenario where you are deemed at fault in an automobile accident and the judgement against you is $1million.  Many auto policies cover the first $100,000 - $250,000 of the liability, but what about the remainder?  This may put you in a scenario where your assets are put at risk to fulfill the liability.  How can you help protect yourself against something like this?

An umbrella insurance policy is extra liability insurance which goes beyond the limits of your auto or home liability coverage.   If a policyholder is sued for damages that exceed the liability limits of auto insurance, homeowner’s insurance or other coverage types, an umbrella policy helps pay the additional amount owed.  It also helps protect against being sued for damages that these polices don’t cover, such as a non-automobile accident you cause outside of your home or lawsuits involving libel or slander.   It can also help with legal fees and court costs incurred during a liability lawsuit.  

Anyone who owns property, has significant savings or owns dangerous things which can cause injuries (pools, trampolines, dogs, etc.). should consider adding an umbrella policy to their existing coverage.  You should also consider an umbrella policy if you engage in activities that increase chances of a lawsuit, such as being a landlord, coaching kid’s sports, volunteering, regularly positing reviews of products or businesses or participating in sports where you could injure others. (skiing, surfing, hunting, etc.)

An umbrella policy is typically obtained through your current automobile or homeowner’s insurance carrier.  Most insurance carriers will only provide umbrella coverage if you have other policies containing liability coverage already in force with them.   If you do not already have an umbrella policy and feel you may need one, reach out to your current insurance carrier for a quote.  Umbrella policies are generally sold in units of $1million in coverage. The cost of coverage will vary based on where you live and the insurance company’s view of potential risk. 

Like an umbrella on a sunny day, an umbrella policy isn’t something you expect to use. But just like an umbrella, sometimes its better to have it and not need it, than to need it and not have it.  For a few hundred dollars a year, an umbrella policy can help protect your assets against potentially being soaked by an unexpected lawsuit. 



Global equities continued their strong start to 2019, with the MSCI All-Country World Index finishing the month just shy of its September peak.  The S&P 500 and NASDAQ indexes both made full recoveries from the year-end selloff and reached new all-time highs.   First quarter US corporate earnings have so far beaten bearish expectations and analysts have begun revising upward their estimates for the remainder of the year. The unemployment rate fell to 3.6% which is the lowest rate since 1969.  Risk assets have also been supported by further dovish shifts from major central banks amid slowing global growth and low inflation data. 

While US stocks experienced their best start to the year since 1987, there are still reasons to be cautious and expect further volatility.  Corporate earnings have beaten expectations; however, growth has not come in nearly as high as 2018 as impacts of the tax cuts have started to diminish, and trade tensions continue to escalate as Chinese tariffs were increased further. Inflation remains low, but any signs of an increase above targets could cause the Federal Reserve to resume rate hikes. 

For anyone needing money the remainder of the year, we see this as a potential opportunity to free up cash and take a little risk off the table. 

Please reach out if you have any questions or if you have cash needs that we may not know about.  


This material is meant for general illustration and/or informational purposes only.  Views expressed in this newsletter may not reflect the views of Royal Alliance Associates, Inc.  It is our goal to help investors by identifying changing market conditions.  However, investors should be aware that no financial advisor can accurately predict all of the changes that may occur in the market.   This material should not be relied upon as investment advice.  Investors should note that there are risks inherent in all investments, such as fluctuations in investment principal.  Past performance is no guarantee of future results.  There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. This article contains forward looking statements and projections.  Past performance is no guarantee of future results.