Who would benefit most from purchasing an umbrella policy?

An umbrella policy is specifically designed to provide additional liability coverage beyond the limits of underlying policies such as homeowners or auto insurance. It serves as a form of protection, ensuring that in the event of a lawsuit or a large claim, the insured has sufficient coverage to protect their assets.

Individuals at high risk of being sued benefit the most from an umbrella policy because their exposure to potential claims is greater. This may include professionals who interact frequently with the public, such as doctors, lawyers, or business owners, as well as those with significant assets that they would want to protect. In these scenarios, an umbrella policy can provide an extra layer of security, covering legal defense costs and settlements that go beyond the limits of their existing insurance policies.

On the other hand, individuals with low income or no assets generally do not need an umbrella policy, as they have less to protect. Additionally, purchasing an umbrella policy is typically not a strategy for lowering tax liability; it is more about managing risk and providing financial security in the face of potential legal challenges.