See if you can guess what these AICPA Personal Liability Umbrella Insurance claims have in common:
- While changing lanes, a driver strikes another vehicle, driving it off the road. A 17-year-old is ejected from the other vehicle and remains in a coma. Cost of claim: $5.1 million1
- A driver swerves to avoid a metal object on the highway and runs over a man changing a flat tire on the side of the road, killing him. Cost of claim: $5 million1
- While on the bay, a boat owner is momentarily distracted and collides with another boat, causing the driver of the other craft to suffer a skull fracture and hearing lost. Cost of claim: $1 million1
What do they have in common? All of the incidents involved CPAs. All of the incidents resulted in shocking, catastrophic injuries. All resulted in litigation. And each of the insured CPAs had a personal umbrella liability policy.
As the term ‘umbrella’ suggests, an umbrella liability policy extends the limits on your personal property and casualty policies, such as your auto, homeowners, boatowners, recreational vehicle or motorcycle policy.
Now let’s imagine the CPAs involved in the above accidents were nearing retirement. What if they did not have an umbrella liability policy? What if all they had was the $500,000 of liability insurance on their primary policy? What would happen to their retirement savings?
Each would be looking at a judgement against them. In some states, qualified retirement plans like a 401(k) are exempt from court judgements.2 If you do not live in a protected state, or if your retirement savings are not in a vehicle like an IRA, you could be forced to liquidate them to satisfy a judgement.
In the accidents described, without an umbrella liability policy the CPA may lose their retirement savings—maybe even their homes2—making a personal umbrella liability policy an easily accessible, affordable method of protecting your retirement and other assets.
An umbrella becomes vitally important when planning retirement
If you’re like most CPAs, you’re good with money. After spending years building up your retirement savings, the last thing you want is for an unexpected catastrophic accident to wipe it all out with one lawsuit. The umbrella liability policy is your key instrument for helping to protect your assets.
AICPA Personal Umbrella Liability Insurance Plan statistics
Over the past five years, the AICPA Plan has paid out $43 million on 45 claims, for an average cost of $957,038 per claim. The majority, 75%, were settled for an amount under $500,000, although 13% were settled between $1 million and $5 million.1
- 92% of claims are due to automobile accidents
- 6% are due to home accidents
- 2% are due to boating accidents
As you get older and attain retirement age, here are some things to consider that may impact your risks:
- When driving, your night vision and reaction times are not as good as when you were younger.
- Though your children are grown, you may find yourself driving your grandchildren to activities.
- Retirees often take on volunteer work, which may entail driving with passengers in your vehicle.
- You may decide to travel, which may mean more time behind the wheel in unfamiliar locations.
- If you own a second property, you may find yourself making more trips there.
- You may find yourself spending more time on social media. Though rare, libel/slander claims do occur and are covered under an umbrella policy.
To learn more about the AICPA Personal Liability Umbrella Plan and how it can help protect your retirement savings, speak with an AICPA Risk Advisor at 800-223-7473 or visit cpai.com.
1Claim examples and statistical claim data supplied by CNA, the underwriter of the AICPA Personal Liability Umbrella Plan.
2Laws regarding retirement account and home ownership exemptions from lawsuit judgments vary by state. Check with your legal professional for more information.
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Mark Thomas CLU, ChFC is a senior vice president on the Aon Professional Firms team. Mark has over 35 years’ experience helping individuals manage risk in their personal lives. You can contact him at mark.thomas@aon.com.
FAQs
In the accidents described, without an umbrella liability policy the CPA may lose their retirement savings—maybe even their homes2—making a personal umbrella liability policy an easily accessible, affordable method of protecting your retirement and other assets.
What is the umbrella insurance for retirees? ›
At any age or life stage, you should consider the value of your assets and your risk of a lawsuit when deciding whether you need umbrella insurance. For example, retirees may own a pricey vacation home or enjoy potentially risky hobbies such as boating, either of which may make an umbrella policy a good idea.
What are the disadvantages of the umbrella policy? ›
What are the disadvantages of the umbrella policy? While umbrella insurance offers extensive coverage, it doesn't cover personal injuries or property, business losses, and intentional or criminal acts.
What is not covered under an umbrella insurance policy? ›
An umbrella policy generally does not provide coverage for: your injuries or damage to your personal property. a criminal or intentional action causing damage to someone else. liability you assume under a contract.
How much does a $1 million umbrella policy cost? ›
Umbrella policies typically start at $1 million in liability coverage. According to an ACE Private Risk Services report noted by Forbes, the average cost a $1 million personal umbrella policy is $383 per year for an individual with one home, two cars, and two drivers.
Is a million dollar umbrella policy worth it? ›
Is umbrella insurance worth it? If you have significant assets, it's worth getting an umbrella policy. The liability insurance within your auto and homeowners insurance policies might not be sufficient if you get sued for an incident such as a dog bite, car accident or accidental injury to someone else.
At what net worth do you need umbrella insurance? ›
Key Takeaways. Umbrella insurance is the defensive part of your wealth-building plan. Anyone with a net worth of $500,000 or more should have umbrella insurance. Your umbrella policy limit should be equal to or greater than your net worth.
Who really needs umbrella insurance? ›
Standard homeowners and auto policies typically won't offer more than $500,000 in liability coverage, which means you may need an umbrella insurance policy to fully protect your assets if your net worth exceeds $500,000.
What is the umbrella retirement plan? ›
The primary uses for umbrella funds are to pool retirement funds from multiple employers to save on costs or to be used by hedge funds, which manage several feeder funds through an umbrella fund.
What are the disadvantages of an umbrella? ›
We all know that the wind is no friend of the umbrella. Many times an umbrella has fallen when the wind picks up and utterly destroys it. An umbrella is shaped in such a way that is could potentially put someone's eye out.
"As a rule of thumb, your total coverage should never exceed your net worth," Austin says, "because under no circ*mstances do you need to protect more than you own."
Does an umbrella policy cover a lawsuit? ›
Umbrella insurance covers defense costs, judgments and court costs in the event you're sued, and protects against liability related to non-bodily and bodily injuries. An umbrella policy typically covers the following: Personal injury. Bodily injury to others.
Do retirees need an umbrella insurance policy? ›
If it rains in retirement, you'll still need an umbrella
For personal liability needs, not much may change between pre-retirement and post-retirement. To the extent that one still owns a home and drives a car, the underlying limits of coverage should most often remain consistent.
Is state farm umbrella policy worth it? ›
State Farm's umbrella policies are a good choice for customers with a high net worth who want extra coverage for property damage, injuries, and possible lawsuits that could result from various types of incidents. To be eligible, you will also need an auto policy from State Farm.
Does umbrella insurance cover medical expenses? ›
Just like your car liability insurance doesn't cover damage to your own vehicle, your umbrella insurance policy doesn't cover the cost of repairing your own property or paying for your medical bills, nor does it cover injuries to you or other members of your household.
How are retirement accounts protected? ›
In general, retirement plans that are covered by ERISA are protected from creditors—and their lawsuits. A 401(k) is an ERISA-qualified plan, so it is likely protected if you get sued. There may be a few exceptions, such as charges brought by the federal government or if you allegedly wronged the plan.
How to protect retirement assets from lawsuits? ›
This is excellent news for the majority of Americans, as it turns out that one of the most effective ways to protect assets is to shield them in retirement accounts. Individual retirement accounts, 401(k)s, and other types of tax-efficient plans can help you prevent the loss of your assets in case of a lawsuit.
Can I lose my retirement in a lawsuit? ›
In California, some retirement accounts are protected (such as 401ks and profit-sharing plans). Others are more vulnerable to judgment creditors (such as IRAs). A judgment creditor's ability to get your retirement account in California will depend on what type of retirement account you have and how much you have in it.
Will an umbrella policy protect my assets? ›
An umbrella insurance policy can help cover your assets and pay for legal fees and expenses if you're sued for an amount beyond your underlying insurance coverages. Homeowners insurance and auto insurance both limit how much the policy will cover.
