Saturday, March 3, 2007

Asset Protection - Don't Forget Your Umbrella

Much (virtual) ink is spilled over asset protection at one of the sites I frequent.

I must confess that, having grown up as the youngest of 9 children, that asset privacy (or privacy of any kind, for that matter) is not exactly one of those things that ranks high of my list of necessities.

That said, I do take special interest in protecting assets from financial predators and thieves. As Scott Adams so famously said in The Way of the Weasel, "Take a billion dollars and throw it in the middle of the Atlantic Ocean, and millions of [financial] weasels will drown trying to get to it".

So what's my solution? It's pretty simple: Get an umbrella policy.

For about $150-250 a year, you can get an umbrella policy that will cover your liabilities up to $1-2 million dollars after other insurance you have (e.g. car insurance) is exhausted.

Chances you'll need to use this are slim, but remember: insurance should primarily be used to prevent against catastrophic losses. The same folks who buy contact lens insurance usually balk at umbrella insurance, although the latter is critical to your net worth.

Assuming, of course, that you have net worth. IANAL (I Am Not a Lawyer) but it would appear that having low or negative net worth takes a lot of the weasel-y fun out of suing you. "No blood from a turnip" is a maxim that also holds true in the financial world.

If you do, talk to your homeowner's and/or car insurance agencies. They may not offer umbrella insurance; in my case, I had to switch to MetLife to get it. Usually, the company who offers umbrella insurance will insist on carrying your home and auto insurance as well... so watch the total cost carefully.

Regardless, take the time to look into it, especially if you have a net worth of $300,000 or more. You may not see your nest egg as particularly huge, but why risk it when for 10 basis points (0.10%) or less you can protect what you've worked so hard to accumulate?

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