When it comes to umbrella insurance, the number one question we get is: “How much coverage do I really need?” The answer? Enough to protect everything you’ve worked so hard to build.
An umbrella policy kicks in when the liability coverage on your home, auto, or other underlying policies runs out. It’s that extra layer of protection standing between your assets and a lawsuit.
So… how big should that umbrella be? Let’s break it down.
Step 1: Add Up What You Have to Lose
Your umbrella policy should protect your total net worth, which means it needs to cover everything that could be at risk in a lawsuit. That includes:
Home equity (the market value of your home minus any mortgage balance)
Possessions (vehicles, jewelry, collectibles—anything valuable)
Savings and investments (including retirement accounts)
Future income (yes, your future earnings can be garnished in a settlement)
💡 Pro tip: Multiply your current annual income by the number of years you plan to work before retirement to estimate your lifetime earning potential.
Add these together and you have a pretty clear picture of what’s on the line.
Step 2: Subtract Your Current Liability Coverage
Now look at your existing insurance policies. Find the lowest liability limit on any of them—typically it’s your auto policy or homeowners policy. If your auto policy only provides $250,000 in liability coverage, anything above that amount could come out of your pocket.
Step 3: Mind the Gap
Take your total assets and subtract the liability limit from your existing policy. The result is your coverage gap—the amount that’s currently unprotected.
Here’s a quick example:
| Asset Type | Amount |
|---|---|
| Home Equity | $300,000 |
| Possessions | $100,000 |
| Savings & Investments | $150,000 |
| Future Earnings | $1,000,000 |
| Total Assets | $1,550,000 |
If your current liability coverage is $300,000, you’ve got a $1.25 million gap. That means you should consider an umbrella policy of at least $1.25 million—possibly rounding up to $2 million to be safe.
Why It Matters
Umbrella claims usually involve serious car accidents, major injuries on your property, or even lawsuits over slander or libel. These things don’t happen often, but when they do, the costs can be devastating. Your standard policies might not come close to covering a multi-million-dollar claim.
Umbrella policies are relatively affordable—often a few hundred dollars a year for $1 million in coverage. And they buy you peace of mind that your future is protected, no matter what storm comes your way.
Need Help Calculating Your Risk?
Download our Umbrella Coverage Calculator to run the numbers for yourself, or just give us a call. We’ll walk you through the process and make sure you’re not leaving anything exposed.
Being there matters most—and we’re here to help you protect what matters most to you.
