How Much Umbrella Insurance Do I Need?

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An umbrella insurance policy provides additional coverage outside the existing limits of other policies, such as car insurance and home insurance.

If you get sued after a car accident or that "friend of a friend" slips and falls at your pool party, the liability coverage included in your home or car insurance will cover the legal fees and any money the court orders you to pay to the injured party, up to a limit. That limit is typically around $250,000 to $300,000.

In a lawsuit in which the fees and damages you must pay exceed that limit, you'd be on the hook for everything above that coverage limit. Umbrella insurance kicks in when the underlying liability limit of an insurance policy is reached.

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Whether you need this supplemental coverage depends mainly on your net worth and your risk of being sued (you might be more at risk than you think).

Here's what you need to know about umbrella insurance and how to determine how much you need.

How much does umbrella insurance cost?

Umbrella insurance is usually sold in increments of $1 million, up to $5 million. To buy it, you'll need to already have a minimum level of home and auto liability coverage, typically, $250,000 for auto insurance and $300,000 for homeowners insurance.

The cost of umbrella insurance can range anywhere from $200 per year on the low end to more than $1,000, according to Trusted Choice, with an average cost of about $380 per year to get $1 million to $2 million of protection. However, the amount you'll pay for umbrella insurance depends on several factors, such as where you live, how much coverage you buy and your risk profile.

To determine how much your umbrella policy will cost, Trusted Choice advises individuals to assess their net worth, review their risk of becoming the target of a lawsuit and choose an appropriate amount of coverage, which should be at least equal to your net worth.

You can also use this calculator to assess how much coverage you need.

What does umbrella insurance cover?

Most umbrella insurance policies offer coverage for the following:

Bodily injury: Umbrella insurance can help cover the cost of medical bills and/or liability claims for injuries to another person, whether it's from an at-fault auto accident or an accident in your home (guest falling, dog bite, etc.).
Property damage: Umbrella insurance can help cover loss or damage you cause to another's property if the damage exceeds your underlying policy limits.
Lawsuits: If you are involved in a lawsuit for slander, libel, defamation of character and/or other personal attacks, umbrella insurance can provide coverage for legal expenses.
Landlord liability: If you own a rental unit, umbrella insurance can help cover liability claims you might experience as a landlord, such as if a tenant trips on the property, gets injured and sues. If your landlord policy reaches its limit, umbrella insurance can provide additional coverage.

How to buy umbrella insurance

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 might get an additional discount on the umbrella policy, as well. 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. 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 classified as potentially dangerous, for example — ask an independent agent who represents multiple insurers to help you find a stand-alone umbrella policy.

Do I need umbrella insurance?

One quick way to tell if you need umbrella insurance is to calculate your net worth. If the total value of your savings, investments, home equity and other assets is higher than the maximum amount of liability coverage your home or car insurance will offer, you want to look into supplementing that with additional liability coverage.

Progressive advises individuals whose net worth exceeds their maximum liability coverage via their standard insurance policies to open an umbrella policy to avoid any negative financial repercussions.

You might also want to look into umbrella insurance if you're at higher risk of being sued. Never thought of yourself as a target for a lawsuit? You might be surprised at the activities and lifestyle factors that can put you at higher risk of being sued.

According to the Insurance Information Institute (III), those risk factors include things such as:

Owning a swimming pool and having pool parties
Renting out a property you own
Having a dog or a teenage driver in the house

You should also consider opening an umbrella policy if you:

Are a landlord
Own property
Have significant savings or other assets
Want protection for liability claims against you when traveling outside the U.S.
Coach kids’ sports
Often host parties in your home
Take part in sports in which you could easily injure others — hunting, skiing or surfing
Are a public figure
Own watercraft or recreational vehicles

Choosing the right umbrella insurance coverage

Umbrella insurance can help protect your assets if claims exceed your insurance policy limits. This extra coverage can give you peace of mind and often makes sense if your income exceeds your liability coverage, or if you have high-risk situations, such as owning a dog or a swimming pool.

You can buy a liability insurance policy through your home insurer or an independent agent, and you can choose the amount of coverage you want.

Purchasing an umbrella insurance policy can be a helpful way to ensure you’re fully protected if the unexpected happens.

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Rachael Green is a personal finance eCommerce writer specializing in insurance, travel, and credit cards. Before joining Kiplinger in 2025, she wrote blogs and whitepapers for financial advisors and reported on everything from the latest business news and investing trends to the best shopping deals. Her bylines have appeared in Benzinga, CBS News, Travel + Leisure, Bustle, and numerous other publications. A former digital nomad, Rachael lived in Lund, Vienna, and New York before settling down in Atlanta. She’s eager to share her tips for finding the best travel deals and navigating the logistics of managing money while living abroad. When she’s not researching the latest insurance trends or sharing the best credit card reward hacks, Rachael can be found traveling or working in her garden.

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