Are umbrella insurance policies worth it, or do they just entice people to sue more frequently?

Dear Dave,

Are umbrella insurance policies worth it, or do they just entice people to sue more frequently?

Tammi

Dear Tammi,

I don’t think there’s any indication umbrella policies entice folks to bring lawsuits more frequently. If you hadn’t noticed, we live in a lawsuit-happy world. There are lots of greedy people out there who would try to sue for absolutely anything—no matter how ridiculous.

I think these types of policies are worth the money. You can get a $1 million umbrella policy that attaches to the top of the liability coverage on your car and homeowners for $200 to $300 a year in most places. So, if your original car and homeowners coverage was $500,000, you’d have $1.5 million in coverage with an umbrella policy.

If you’ve got a substantial net worth, or if there’s just something that gives the impression someone might be able to get a lot out of you, an umbrella insurance policy is a smart buy.

— Dave

Dear Dave,

My husband and I own a small business. We have a large account providing wholesale items to a client. Our original agreement was to work on 30-day payment periods, but he is three months behind on the bill. We live in a small town, and the businesses here stick together and help each other out, so we don’t want to ruin the relationship. Do you have some advice on handling this situation?

Hollie

Dear Hollie,
From what you said, I assume this guy’s not a cheat or anything like that. He’s probably like a lot of small business owners in that he’s just a little disorganized. Still, you need to correct this behavior.

If it were me, I’d go to his office and have a friendly, sit-down meeting about things. There’s no reason to start throwing threats around, but he needs to understand you can’t be his bank. You’re a small business, too, and you need your money.

Ask a few questions, and find out what’s really going on. Then, let him know it will help matters if he can get current on the bill by a certain date. You’ve provided goods and services, and he owes you money, so this is a fair request. You might think about adjusting your payment agreement to reflect that once he’s current, payment must be within 10 days of delivery from that point on.

If that’s not workable, you may have to switch to a cash-only basis—where payment is due on delivery. And if none of these options work, well, you should probably tell him to find another supplier.

— Dave