Not to confuse my metaphors, but when it rains, you can take a real bath. When it rains, it pours. And so on and so forth.

What’s my point? When bad things happen, you can lose a lot.

If you have any assets to protect, you need an umbrella. Welcome the “Umbrella” insurance policy.

An umbrella policy is an insurance policy that provides protection against almost any financial loss you might suffer. Whatever might befall you will be covered. An umbrella policy is an inexpensive insurance policy that can provide $1 million or more in coverage for any liability you might face.

Umbrella policies are enormously powerful and enormously important. We always recommend that our clients obtain an umbrella policy. There are several reasons for this. As we already pointed out, an umbrella policy can provide resources with which to pay a liability claim. This not only protects you, but it also creates a fund from which someone whom you have injured can be compensated. We have many high net worth clients who employ domestic staff, such as a nanny, a personal assistant, a chef, a housekeeper, or a driver. For them, an umbrella policy can be enormously valuable in the event that they face an employment-related claim. However, it is important to ensure that the policy carries an Employment Practices Liability endorsement because a lawsuit alleging a wrongful termination claim is not covered without that endorsement. In addition, it can count under certain circumstances toward liquidity analysis when determining liquidity for purposes of fraudulent transfer analyses (at least as to unknown claims that would be covered by the policy). Those who serve on a non-profit Board should have a Director’s & Officers coverage through the nonprofit but they should also have a D&O endorsement on their umbrella policies. An umbrella policy is crucial for those who serve as a trustee (including trustee of a family trust) because of the likelihood of facing a claim for breach of fiduciary duties (here, too, it is important to ensure that you have a Family Trust endorsement).

The risk of facing liability as a result of the ordinary activities of life is enormous and growing every day. A few hundred dollars per year can buy you enormously powerful protection. If you have assets to protect, you have no excuse not to have an umbrella policy.