Why Every Physician Needs Umbrella Insurance Now

I have published several articles recently addressing physician insurance needs (i.e., life, disability, malpractice, etc.). This blog post will address umbrella insurance in particular. You will find it all here from the basics of what umbrella insurance is to cost and worth.

As a physician, you work diligently to provide exceptional patient care but must protect your assets and career from unexpected financial risks. One crucial aspect of safeguarding your future is obtaining adequate umbrella insurance. In this blog post, we will explore what umbrella insurance is, what it covers, how much coverage physicians need, typical costs, why it is a wise investment, and whether it is worth it! If the title didn’t spoil it for you already, here is why every physician needs umbrella insurance now! 

What is umbrella insurance?

As always, let us start with the basics. What is umbrella insurance? Umbrella insurance is a type of liability insurance that provides additional coverage beyond the limits of your primary insurance policies (auto, homeowners, disability, malpractice, etc.). It acts as an ‘umbrella’ by extending your liability protection to shield you from large claims that exceed your standard policy limits. For physicians and doctors alike, who may face high-risk situations due to the nature of their profession, umbrella insurance offers an extra blanket of protection.  

In simpler terms, umbrella insurance is ‘extra’ insurance. For the cracks in your other insurance policies, or if a claim is more than what your other insurance policies can handle, umbrella insurance is there to help.  

What does umbrella insurance cover exactly?

So, if umbrella insurance is the ‘catch-all’ insurance policy, does it cover everything? Not exactly… Umbrella insurance offers broad coverage that can protect you in various scenarios. It typically provides the following coverage:

• Personal liability: includes incidents on your property, such as slip and fall accidents, which may result in costly medical bills and legal fees.
• Auto liability: If you are involved in a car accident and held liable for extensive damages, umbrella insurance can often help cover costs beyond that of your auto insurance limits.  
• Professional liability: Also known as malpractice insurance, umbrella coverage can protect you from potential lawsuits resulting from medical errors or negligence.
• Libel or slander: If you face a defamation lawsuit, umbrella insurance can help cover legal expenses and settlement costs in these cases.
• Coverage gaps: Lastly, umbrella insurance can fill in gaps left by your primary insurance policies, ensuring comprehensive protection

As you can see, umbrella insurance has broad and far-reaching coverage compared to other, more nuanced policies. Again, umbrella insurance is a ‘catch-all’ for claims with more significant limits or gaps in primary coverage. Are you starting to understand why every physician needs umbrella insurance now?

How much umbrella insurance do physicians need?

OK, now you are starting to understand the importance of umbrella insurance. You might now be asking yourself, how much coverage do physicians need? The appropriate amount of umbrella insurance varies depending on each individual’s circumstance. Assets, income, potential liability risks, and more can influence this. As a physician, you likely have (or will accumulate) significant assets, making you a target for lawsuits seeking substantial compensation. Experts recommend obtaining umbrella coverage that equals or exceeds your net worth to ensure adequate protection.  

To determine the correct amount of coverage for you, consider factors such as the value of your home, investments, savings, and future earnings. Better put, the wealthier you are, the more coverage you need. Granted, there is wide variability in physician income, but the average physician umbrella policy is generally between $1 million and $5 million. The more coverage you purchase, the cheaper each subsequent million becomes.

When my wife and I were still in training, we took out an umbrella insurance policy covering $2 million. We have re-evaluated our coverage needs as we have completed training and graduated to our peak earning potential. Consulting with a licensed insurance professional can help you assess your risk exposure and determine the optimal coverage level. 

How much does a typical umbrella insurance policy cost?

As mentioned above, when my wife and I were in training, we purchased a $2 million umbrella insurance policy. The annual cost of that policy was $1,170.00. However, the cost of umbrella insurance for physicians can vary based on several factors. These factors can include your profession, location, coverage limits, and your chosen insurance provider. However, umbrella insurance premiums are generally quite affordable compared to the potential financial devastation of a lawsuit.  

On average, a $1 million umbrella insurance policy may cost anywhere from $200 to $500 per year. As you increase coverage limits, the premiums will rise accordingly. Remember that the peace of mind and added security umbrella insurance provides outweigh the relatively small annual cost—another reason why every doctor needs umbrella insurance now.

When should physicians purchase umbrella insurance?

So, I have you convinced at this point that you need umbrella insurance coverage. When is the best time to purchase an umbrella insurance policy? Given that (in the grand scheme of things) umbrella insurance policies are relatively cheap compared to other insurance policies you will purchase (term life and disability), I would recommend that you get one while still a trainee. As mentioned, my wife and I purchased an inexpensive policy for roughly $1000 a year. This purchase should be a priority if you are living below your means as a resident.  

Is umbrella insurance worth it?

I argue, overwhelmingly, yes! Umbrella insurance is worth it. It is a valuable investment for physicians in protecting your career, assets, and future earnings. The potential costs of a severe lawsuit far exceed the relatively affordable premiums for umbrella insurance coverage. A lawsuit could have substantial financial implications, affecting your savings and jeopardizing your retirement.  

As physicians, we often must think about alternative diagnoses or ‘backup plans’ if a treatment does not work. As an intensivist, there are often second, third-, and fourth-line treatments we consider when dealing with patient illness. Insurance coverage and asset protection are no different. A physician needs to institute multiple barriers protecting their financial well-being. Umbrella insurance is one of those necessary barriers.   

Where do physicians purchase umbrella insurance?

If you have made it this far in this article, you are likely interested in purchasing an umbrella insurance policy. So where does a physician buy an umbrella policy? As with many other insurance policies, physicians should shop around and find the best coverage for the best price. I would start by inquiring about umbrella insurance with companies you already use for other insurance policies (i.e., your home, car, etc.). It is common for many insurance agencies to require that you insure your home and vehicles before you can purchase an umbrella policy.  

Take home points

It can feel overwhelming having to make sure you have all the insurance coverage you need as a physician. I have written countless articles on term life insurance, own-occupation disability insurance, malpractice insurance; the list goes on. With the addition of umbrella insurance, it can seem like the amount of coverage needed is endless. However, a few ‘must haves’ exist in the physician insurance world. I genuinely believe that umbrella insurance is one of them. Given the nature of physician careers and their (generally) high incomes, they can be targets for litigation. As such, guarding against financial disaster is essential.  

Why every physician needs umbrella insurance now

As a physician, securing your financial well-being should be a top priority. Umbrella insurance provides the extra protection to safeguard your assets and career from unexpected liability claims. With its broad coverage and relatively low cost, every physician should consider obtaining umbrella insurance to ensure peace of mind and a secure financial future. Remember to assess your needs, consult with insurance professionals, and make an informed decision that aligns with your risk exposure and financial goals. As always…

Stay motivated!

The Motivated M.D.

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