umbrella insurance

How Much Umbrella Insurance Do I Need?

Having too much liability insurance is better than having too little. Use our calculator to determine how much umbrella coverage is right for you.

An umbrella insurance policy typically covers the same things as your home and auto policies, plus a few more, including lawsuits that arise when you're driving abroad or operating rented watercraft, or from alleged libel, slander or defamation of character.

Umbrella coverage picks up where the liability limits of your homeowners and auto policies leave off. It's usually sold in increments of $1 million. Umbrella insurance costs roughly $150 to $350 a year for the first $1 million of coverage and about $100 per million of coverage above that. What you'll actually pay depends on where you live (rates vary by state and the insurer's experience there) and how many homes, cars and boats you're insuring. Use this calculator to assess how much umbrella insurance coverage you need.

Umbrella Insurance Calculator
Net Worth
This is your assets minus your debts; you can quickly calculate your net worth here.
Home Equity
This is the amount of equity you currently have in your home,up to your state’s exemption limit. Federal and state exemption laws (also known as bankruptcy exemptions) prevent judgment creditors from seizing certain types and amounts of property, and every state except Pennsylvania and New Jersey provides a homestead exemption that protects at least some of your equity in your primary residence, but the amount varies greatly. Find your state’s homestead exemption here.
Value of Retirement Plans
A judgment creditor also can’t go after any employer-provided retirement or pension plan -- including 401(k)s and deferred-compensation or profit-sharing plans -- that’s qualified under ERISA, the Employee Retirement Income Security Act. Also, states generally exempt non-qualified retirement accounts (including traditional IRAs, Roth IRAs, SIMPLE IRAs, and SEP, Keogh and 403(b) plans), but specifics vary.
Limit of Your Liability Coverage
This is your auto liability coverage for injury to one person or your homeowners liability coverage, whichever is less.

Buying an Umbrella Insurance Policy

Before most insurers will sell you an umbrella insurance policy, you must buy your homeowners or auto policy from them and carry a minimum amount of liability coverage—typically $300,000 on your homeowners policy and, on your auto insurance, $250,000 for bodily injury to one person and $500,000 per accident, says the III. Most insurers cap the home and auto liability coverage they will sell you at $500,000 or $1 million. It's usually more cost-effective to buy an umbrella policy than to increase your liability coverage beyond the minimum required by your insurer.

If you buy your home and auto insurance from the same insurer, you'll typically get a discount of 10% to 15% on your annual premiums, and you may get an additional discount on the umbrella policy. You can offset at least some of the umbrella premium by taking larger deductibles on your auto and home insurance policies.

With a single insurer, your coverage is less likely to fall through the cracks if the requirements for the umbrella policy change. And if you're sued, you'll have one set of defense lawyers for the entire case. Otherwise, agents advise you to buy the umbrella policy from your auto insurer because most large lawsuits involve auto accidents.

If your current home or auto insurer won’t sell you an umbrella policy—because your dog's breed is reputed to have a bad claims history, for example, or your family has had too many fender benders—ask an independent agent who represents multiple insurers to help you find a "stand-alone" umbrella policy.

Consider adding an endorsement to an umbrella policy for excess uninsured/underinsured motorist coverage, which covers you not only as a driver but as a passenger, bicyclist or pedestrian if you’re hit and the at-fault driver doesn’t carry enough insurance. It costs $100 to $200 per policy.

If you serve as a volunteer on a not-for-profit board, your homeowners and umbrella policies typically cover you for bodily injury and property damage—but probably not for all potential lawsuits. An endorsement for your umbrella policy for directors and officers coverage typically costs less than $1,000 a year for $1 million to $2 million of coverage.

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