Part of protecting yourself, your family, and those who are dear to you, is protecting your personal net worth. Work with your agent at Saucon Insurance Agency serving Bethlehem, PA and the surrounding area on financial planning that includes personal umbrella insurance.
What is your net worth?
If you add up all the things you owe and deduct this total amount of debt from the value of all the things you owe, this is your net worth. Be sure to consider the current value of assets not what you paid for them, especially if the asset appreciated in value.
Here is how to figure out your net worth:
- Add up the following, the remaining balance on your mortgage loan(s), all your outstanding credit card debts, the balance remaining on auto loans and any other loans that you have. These are your total liabilities.
- Add up the net value of every asset that you have, such as the amount of the appraised value of your real estate that exceeds the balance on the mortgage loan. If a home is worth $1 million and you still owe $600,000 on the home loan; the net value of this asset is $400,000. Do this same calculation for every asset and then add all the net values together. These are your total assets.
- Subtract your total liabilities from your total assets. This is your net worth.
Usually, your net worth is the figure used to set the minimum amount of personal umbrella insurance, which you should carry to be adequately insured. Umbrella insurance extends the policy limits of other policies and may provide extra coverage for some things that are not covered otherwise. The strategy is to have personal umbrella insurance that provides sufficient protection for your net worth in the face of a big claim against you.
Umbrella Insurance for Negative Net Worth
What if you owe more than all your assets are worth? This is a negative net worth. It is still a wise strategy to carry umbrella insurance because even when you have no positive net worth, you can be sued and a judgment may be entered against you that can become a lien on anything you try to do in the future.
Protecting your net worth with personal umbrella insurance is a valuable strategy. As a general rule, you want to carry at least the amount of your net worth as personal umbrella insurance. If you might be sued for a larger amount, you may want to have even more coverage. Consult with your agent at Saucon Insurance Agency in Bethlehem, PA to discuss these issues and to get a quote for umbrella insurance.