Volume 2 of The Most Important Newsletter Series That You Will Ever Receive.

Advisor’s Journal:

I hope that you and your family had a wonderful Thanksgiving.  Its is hard to believe that the new year is only a couple of weeks away.

Today we add another block to the wall that protects our wealth.  No castle worth building is without a curtain wall or moat: protective barriers against plunder. Last month we tailored our personal auto liability to keep   potential auto-related pitfalls away from our savings, assets and future earnings.  We are going to do the same for our personal liability.  The primary source of your personal liability comes from your homeowner’s or renter’s insurance policy.  Your personal liability coverage follows you wherever you go. When the golf club flies out of your hand, when a child gets injured in your swimming pool, or your son or daughter cause property damage or injury at school, it’s your personal liability that will  provide insurance coverage.  A typical homeowner’s policy will provide $300,000 to $500,000 in personal liability.  Is that enough coverage? I recommend adding a $1,000,000 umbrella policy on top of your homeowner’s and auto insurance.  Doing so will give you $1.5 million auto liability coverage and $1.3 to $1.5 personal liability coverage.  Your umbrella should also provide an additional $1,000,000 in uninsured and underinsured motorists coverage.  Why?  Consider this example. Joe Smith is 40 years old, married, and makes $50,000 a year.  While driving to work he is struck head-on by a driver who does not have any insurance.  Joe’s injuries are so severe that it is doubtful that he will be able to ever work his job again.  He had planned on working until age 60, which means that he and his family have lost out on at least $1,000,000 of future income. Because Joe has uninsured and underinsured motorists coverage on his umbrella policy, he can make a claim on his own policy to collect on his lost income, pain and suffering and loss of lifestyle.  As a result, Joe and his family do not have to miss out on the quality of retirement they had planned.

Best of all, we can typically add the umbrella for little to no cost.  How? Most insurance companies will provide a 5 to 10% discount on your homeowner’s policy if you have an umbrella.  In addition, consider   raising your auto and homeowner’s property deductibles.  Often times the combination of these three will  allow you to purchase a liability umbrella for little to no cost.  Without experiencing a significant increase in premium, you now have a solid liability barrier between your assets and possible judgments or negative consequences.

These layers of liability protection are essential to protecting you wealth.  Next month we’ll discuss how you can start turning your insurance portfolio into a wealth accumulator.  Wealth protection and accumulation should be the result of every properly tailored insurance portfolio.