Liability insurance is the coverage that protects everything else. A client can have a perfect retirement plan, but one lawsuit without adequate coverage and it unravels.
How I think about it
The rule of thumb is simple: liability coverage should at least match net worth. If a client has $2 million in assets, they should have $2 million in liability coverage. Kerdora's calculator uses this logic, pulling net worth directly from the balance sheet.
Most clients have some liability coverage through their auto and homeowners policies. Bodily injury limits on an auto policy, personal liability on a homeowners policy. But those limits are usually $300,000-$500,000. For a client with significant assets, that's not enough.
That's where an umbrella policy comes in. It sits on top of the underlying policies and extends coverage to $1 million, $2 million, or more.
What you're tracking
For each liability policy:
Type — Personal Liability, Professional Liability, Umbrella Policy, or Other
Coverage amount — the total liability limit
Coverage details — notes on what's covered or any special terms
Premium — how much they're paying and how often
The gap
Kerdora calculates coverage needed based on net worth. If their net worth is $1.8 million and they have a $1 million umbrella, there's an $800,000 gap.
The strategy matters here too. For high-net-worth clients, the answer is almost always "buy more umbrella coverage." For a younger client with modest assets, the existing auto and homeowners liability limits might be enough.
Professional liability is a separate conversation. If they're a business owner, doctor, or anyone with professional exposure, that's its own policy and its own analysis. Kerdora tracks it alongside personal liability so you can see the full picture.
Worth mentioning
Umbrella policies are shockingly cheap for the coverage they provide. A $1 million umbrella might cost $200-$400/year. When you show a client that number next to their net worth, the conversation is usually short.