Umbrella Liability Insurance
How much liability insurance should one have? We presently have a $1 million umbrella policy but I wonder if this is sufficient. Our total net worth is about $3.4 million, including our house. However, about $1.6 million of our assets are in our 403b plans. Are the assets in these retirement plans protected from lawsuits? If not, do we need our liability coverage to be equal to our total net worth?
Terry Says
Your retirement plan assets ARE protected from lawsuits under ERISA, as long as they are in your 40l(k). There is some question in various states about whether an IRA could be vulnerable. Presuming you live in Illinois, in general, IRAs, 401(k)s and pensions are exempt from the account owner’s creditors under Illinois law. They cannot be seized or garnished by creditors.
Remember that your personal umbrella liability will not pay out if it is a business-related lawsuit. And also you must have underlying homeowners liability. But “umbrella” insurance is so relatively inexpensive and easy to buy that you might want a bit more– just to let you sleep better at night. I only say that because you worried enough to ask this question!
