Dear Dave,
We live in Colorado, and we need some advice on protecting our assets. My wife is a teacher, and I’m a nurse. We make around $180,000 a year combined, and we’re set to pay off our home next month. We also have two teenagers who are both driving, so we were wondering about the best way to protect everything if one of them has an accident and we get sued, or something else tragic happens.
Spencer
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Dear Spencer,
With your income, and the stage you’re in when it comes to wealth building, I think it’s time to add an umbrella policy. This is a liability policy, and you could probably buy an extra million in liability coverage for around $250 a year. It attaches to the liability policy that’s already part of your homeowners and car insurance.
With a couple of teenage drivers in the house it might run a little more than $250, but I wouldn’t think it would be much more, if any. It would just add an extra million to the mix, just in case someone decided they were going to come after you because of a bad situation.
As you continue building wealth later, like if you get into real estate and start buying rental properties, make sure you put those in a limited liability company (LLC). You’re not there quite yet, but it’s always a good idea to plan ahead and do whatever you can to keep the size of the target on your back relatively small.
—Dave