Smart Money MD has a column worth reading about buying Umbrella Liability insurance. He properly states:
Umbrella insurance can essentially be viewed as added protection onto your auto and home insurance. For instance if your auto insurance covers $250,000 in liability and you lose a suit for $1 million, you may be liable for the difference. If you aren’t able to pay up, then your creditors can try to go after your savings. Now there is a semantic argument about how unlikely it is that someone will go after your bank for that much money, but in theory it could happen.
But he then goes on to argue against over insuring, and I have a different viewpoint. As stated, umbrella liability insurance picks up where your auto and homeowner’s liability coverage ends and extends up to the amount of coverage you purchase. It is usually sold in increments of million dollars, i.e. you purchase one or two or five million dollars in protection.
This insurance also covers “miscellaneous” liabilities as well. When President Bill Clinton was sued for sexual harassment by Paula Jones, his umbrella liability policies paid many of the legal costs. But understand that it does not cover business liability or malpractice.
The insurance is relatively inexpensive. Expect under three hundred dollars per million dollars coverage per year (my five million dollar policy costs eleven hundred dollars a year).
Every physician’s family (really, every family) should have this coverage. How much? You should consider how much you might be sued for-regardless of your exposed assets. I recommend at least 1-2 million dollars for those with low amounts of risk (single individuals, low mileage drivers) and more for those with higher risks (families with teenage drivers, etc).