Wednesday, April 16, 2014
Inquirer Daily News

When do I need umbrella insurance?

Author and radio talk show host Dave Ramsey.
Author and radio talk show host Dave Ramsey.

Dear Dave,

At what level of net worth should someone consider umbrella insurance?

-Matt

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  • More financial advice from Dave Ramsey
  • Dear Matt,

    I think it's something you should consider if you have a net worth of $500,000 or greater. But first you should be clear on what net worth really means.

    Net worth is what you own minus what you owe. So the fact that you make a million dollars a year is not the determining factor in whether or not you're a millionaire. The only people who use that definition are the financially uninformed and politicians who twist things around and throw out catch phrases designed to further their own agendas.

    That being said, I would get umbrella insurance, which is extra liability insurance, when you reach the half-million mark in net worth. Prior to that I'd suggest carrying $500,000 worth of liability on your homeowner's, car insurance and any other policies that have liability attached to them. Once you reach and cross that $500,000 threshold in net worth, however, I'd advise picking up another $1 million in liability insurance, called an umbrella policy, that attaches to the top of that and covers everything for an additional $1 million.

    It's a great buy, Matt. You can get it for about $200 a year in most states.

    -Dave

    Dave Ramsey is America's trusted voice on money and business. He's authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

    Dave Ramsey Philly.com Business Columnist
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