Business owners often view their business as their most valuable asset. For the successful ones, it usually is, which is why many business owners take specific steps to protect it from liabilities.
However, when building a successful business, business owners can accumulate substantial personal assets that are often unprotected.
While several strategies can be employed to shield personal assets from business liability claims, many business owners are still vulnerable to a direct assault on their assets. For instance, establishing a Limited Liability Company (LLC) is a popular strategy for separating business assets from personal assets and liabilities. However, an LLC will only protect a business owner’s assets in the case of a business liability claim. The LLC provides zero protection if the business owner incurs a personal liability claim.
Business Owners are Prime Targets
Successful business owners, like high-profile executives, entertainers, and professionals, are more likely to become targets for people who understand the "deep pockets" nature of personal liability claims. Most people are just a banana peel slip away from losing their assets to a liability claim. However, the more successful or high profile you are, the risk exposures mount up, and the size of the claims increases. In some cases, claimants have successfully gone after both business owners’ personal and business assets.
Business owners have a choice in how they can protect their assets from liability claims they can "lawyer up" (which only enriches the lawyers) or purchase sufficient personal umbrella liability insurance. One can cost tens of thousands of dollars, while the other just several hundred dollars.
Don’t Lawyer up; Layer up on Personal Umbrella Liability Coverage
Regardless of the legal protections business owners have, the foundation of a risk management plan should be laid with sufficient personal umbrella liability protection. What’s sufficient? Many risk management specialists recommend buying as much personal umbrella liability insurance as possible. But it should at least be adequate to cover the total value of your personal assets, including the value of your home, personal property, and non-qualified investments. And, as your individual wealth increases, additional coverage should be layered on abundantly.
Relative to its capacity to protect your financial life, personal umbrella liability insurance is the most cost-effective insurance you can buy. $1 million of coverage can be purchased for as little as $300 per year. For an additional $75 or $85, you can add $1 million increments to your coverage. The best part is that when you are subject to a claim, no matter its size, the claimants will virtually ignore you and direct their attention to your insurance company which will litigate the claim on your behalf.