Do I Need Umbrella Insurance

Luke is with us in Green Bay. Hi Luke. Welcome to the Dave Ramsey show. Thank you. Good afternoon, Dave and Chris. Sure. Question for you today is regarding umbrella insurance. My wife and I a few years ago got a 1 million dollar umbrella policy liability and just curious if there's a certain net worth where we should look at adding to it on the 2 and 3 and 4 million as you go along or there's a certain ratio that you kind of have a rule come forth. Well, it starts to get ridiculous when you get above 5 million. The bargain is 1 million. A couple of hundred bucks, you can buy a 1 million umbrella. But above 5 million, you start to get ridiculous. I mean, I have found a 10 million that's decent. I think I've got 10 right now, but I also have the Dave Ramsey problem. I mean, if I bump into somebody, they're gonna be going, oh, I'm okay. What's your name? Dave Ramsey. Oh God! You know, and so all of a sudden, you know, it's like I got a big target on my butt, right? So, um, I went ahead and picked up an extra level of it, but I don't know that I would necessarily recommend that anything above 5 million. What I do tell you to do when you get above the million need, I mean if you're starting to sit on a net worth of you know, north of 3 to 5 million dollars and that kind of a thing, you're starting to worry a million dollars is probably not enough. You really need to start looking at other risk management things you can do then, and that's starting to put assets into, uh, LLCs and trusts and so forth. I personally do not own a single thing anymore. I don't even own my cars. My cars are in LLCs, and that's all from a risk management standpoint that the owner of the car is the only person that could get only, only entity that could get sued. If something happened, the individual, only way I could get sued personally is if I had committed a criminal act. And they can, they can pierce it then. But, but, um, so like one of my farms is in one LLC, this building is in a trust, uh, and so on. No, I don't personally own anything. And that way, if someone falls over in one of those properties or something happens around one of those items, then they can only, if you lost the lawsuit, they can only take the assets in that entity. That's right. And you bring up the statement risk management, which is huge because you can work so hard to build wealth, but if you don't protect it the right way with an umbrella policy, which all that is folks is it's another layer of coverage over your automobile and your homeowners. And so it's just like an umbrella that you'd walk outside with. It's that extra layer of protection. And Dave said it a million dollar policies, a couple hundred dollars a year. And so you can get that in place, but the LLC and the trust, they are crucial things for people to get set up. Well, and what you're going to find is, is that when you get north of $5 million in net worth, if you're being wise and watching everything, there's two things that get, that start three things. They start to get very complicated. Your taxes, uh, your risk management portfolio, meaning you start buying things in the name of something else. And, uh, uh, your estate plan and the three of those things work together. Uh, you need to have the entities built in such a way that they serve the estate plan, but also serve risk management. And so that that's where, you know, you're going to start to spend some money on defense. Yes. And on diligence, um, to keep the government's hands off, to keep a target off your butt, that kind of stuff. But you know, in such a small dollar, very few, very few times do I, what I suggest, it would be highly unusual for me to suggest more than a $5 million umbrella. And umbrella only covers liability too. It doesn't cover anything else. So it's not, it's not covering the property itself. You get covered with traditional insurance, but the umbrella, it just attaches to the liability limits on the top of your car policy. The top of your liability limits on your car policy, the top of the liability limits on your homeowner's policy extends them out another million dollars at 250 bucks, somewhere around there. And we've got all kinds of everyday millionaires out there. So if this is something that rings true for you, I want you to go to Dave Ramsey.com and click on the insurance ELP and start to have that conversation. Like this is the time to get those things in place.