When I read tragic stories in the news, the planner in me always wonders how those involved will be affected financially. I wonder if they are prepared or have the proper insurance coverage.

While it is never possible to prepare for everything, an umbrella policy greatly enhances your ability to protect your assets.

An umbrella policy is an insurance policy that protects your assets from liability. Umbrella policies usually play a secondary role to your homeowner’s and auto policies. This means the umbrella will cover you if you ever get sued for more than your homeowner or auto policy limits.

Here is an example. Your teenager causes an accident that injures five people. The families of those injured each sue you for $1 million, but your policy has a $500,000 limit. Your personal assets might be forced to cover the other $500,000, a sum few people can afford.

True, most people will never be sued for such a huge amount, but it does happen. While I believe it a good idea for everyone to have an umbrella, some people require it. If you can identify with anything mentioned below, you may want to give it some extra consideration.

People with inexperienced drivers in the family should consider an umbrella policy.

Most often, bad driving is associated with teenagers, but it doesn’t have to be. If someone in the family drives at night or has a long, congested commute, they may be more prone to having an accident.

Drivers who suffer from poor eyesight, dementia or who take certain medications should also consider an umbrella policy.

Owning certain recreational items also trigger the need for an umbrella policy. Swimming pools, trampolines, and batting cages may also increase the need.

You might have strong friendships with your neighbors and family, but when a child is hurt, people can change. Dog owners should also think more seriously about an umbrella policy.

People with deep pockets also need an umbrella policy, even if they don’t engage in activities that would trigger the need. They have targets on their backs and need to prepare.

Certain activities will disqualify you from using an umbrella, but if you do engage in high-risk activities, it won’t hurt to check. Activities that are intentional or criminal will not be covered.

Do not confuse an umbrella policy with any other type of insurance. Business owners still need malpractice, bonding or errors and omissions, depending on the type of business. Work with an insurance pro to make sure all assets are adequately protected.

A benefit to umbrella policies is that they are relatively inexpensive. Umbrella insurers usually have minimum requirements for home and auto insurance so you may end up paying more for those to qualify for an umbrella policy.

Labeling this type of insurance “umbrella” is more than clever marketing; it is seriously needed by many who pass it by.

Tom and John Mi

lls are registered investment advisers and certified financial planners. Reach them at 254-0155, MillsWealth.com. Securities offered thr

ough LPL Financial, Member FINRA/SIPC. Investment advice offered throu

gh Strategic Wealth Advisors Group (SWAG), a registered investment adviser.