Every week, Allworth Financial’s Steve Hruby, CFP, and Bob Sponseller, ChFC, answer your questions. If you, a friend or someone in your family has a money issue or problem, feel free to send those questions to yourmoney@enquirer.com.
K.R. in Boone County: I’m 52 and have about $1 million saved. I’m wondering if I need umbrella insurance. Is it actually a smart purchase or just another way for insurance companies to make money?
Answer: Like many decisions involving insurance, it really depends on your specific situation, but we don’t know any specifics about yours other than your assets. But yes, generally speaking, umbrella insurance (also known as “excess liability insurance”) can be a worthwhile purchase for many people. Here’s why.
Think of umbrella insurance, as, well, an umbrella. Its main goal is to essentially cover all your other insurance policies you already have in place (think auto and homeowner’s insurance) to make sure there aren’t any “gaps” in your coverage. This way, if something catastrophic would happen to you – or a spouse or a child – and the claims exceed what’s already covered by your existing coverage, your umbrella policy would step in to cover the rest. Likewise, if you or someone in your household is sued, the policy helps protect your assets.
While umbrella coverage can make sense for a lot of folks, there are a few specific types of people who should seriously consider adding this kind of policy to their coverage: Anyone who has a significant amount of assets to protect (we would say that you fall into this category); anyone who has something on their property that could injure others (such as a pool, trampoline or ATV vehicles); anyone who owns a business; and anyone who coaches youth sports.
Here’s the Allworth Advice: The good news is, relatively speaking, most umbrella policies are pretty inexpensive. For $1 million in coverage, the average annual premium is around $380 according to NerdWallet. That’s not a lot to pay for some extra peace of mind. Talk with your insurance provider to see what they quote you (you may get a bit of a discount if you have both your home and auto policies with them as well).
Tracy in Warren County: My husband and I are trying to decide who to name as our executor. We have a few family members in mind and even a few friends. Any suggestions for how to make this decision?
Answer: Very carefully. Being an executor of an estate is a huge task, and the role only gets more complicated as the estate size increases. This person is going to be dealing with everything from settling accounts, to paying off your debts, to filing your will, to communicating with your beneficiaries. So, to start, take a look at your list of candidates. If someone isn’t organized and detail-oriented, they should come off that list. Ditto if you don’t consider them honest and responsible.
Similarly, consider the temperament of the people you have in mind. It’s best if whomever you choose is patient since the probate process can be long, and, at times, challenging. You also want someone who won’t hesitate to put in any extra work if needed – and use “tough love” if necessary. Age is an important factor as well since your executor obviously needs to outlive you both. Therefore, consider choosing someone younger than you and your husband.
The Allworth Advice is that once you decide who you would like to pick, make sure you have a formal conversation with them. Ask if they’re willing to serve in this role, and if they are, discuss your expectations. And, because they could turn you down, have a back-up in mind as well.
Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Retirement planning services offered through Allworth Financial, a SEC Registered Investment Advisor. Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Visit allworthfinancial.com or call (513) 469-7500.
This article originally appeared on Cincinnati Enquirer: Allworth Advice | Do I need umbrella insurance?
Reporting by Steve Hruby and Bob Sponseller / Cincinnati Enquirer
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