umbrella insurance: how much do i need?

You have insurance for your home, your car, your family heirlooms … Do you really need more protection? With higher-than-usual coverage limits, umbrella insurance bridges the gap between your primary types of insurance and your savings. We'll help you figure out how much personal umbrella coverage you should buy.

A personal umbrella policy provides an extra layer of protection when you need it most, like in the event of costly liability claims or legal rulings that could cause you and your loved ones financial ruin. But its protection only kicks in if you've reached the limits on your underlying policies, not before. Umbrella coverage isn't a necessity for everyone, but for certain budgets and lifestyles, it can be important.

umbrella insurance: the basics

It's a great idea to invest in umbrella coverage if you have a high net worth or if you have certain risks in your everyday life (if you have a house, children, a dog, a car, and so on). Plus, umbrella coverage can generally help protect you no matter where you travel, so you're better protected even if an incident occurs abroad.

Keep in mind, the reason it's important to maintain higher levels of coverage on your home and car policies is because umbrella coverage only kicks in once your minimum underlying policy limits have been reached (otherwise any gap in coverage is your responsibility).

The upshot is that an umbrella policy is capable of covering even more significant financial damage. Whereas your homeowners policy might cover about $300,000 in liability protection, umbrella insurance can generally stretch your coverage anywhere from $1 million to $5 million, so you're protected under the most extreme circumstances, like if sky-high costs resulting from a lawsuit threaten to drain your savings.

how much additional coverage should i get?

You want to know just how much you have to protect (essentially, how much is at risk), so it helps to begin with your net worth. Not sure how to calculate yours? A simple way to get a good estimate of your net worth is to total up the value of all of your belongings (meaning your home and other properties, bank accounts, retirement accounts, and any investments you might have) and subtract any debts or liabilities you currently have; that's a simple way of figuring out your net worth.

It's also important to consider your current and expected income when deciding on the right level of umbrella coverage. Basically, the more you have, the more liability protection you'll want to purchase.

required minimum coverage limits

Because your umbrella insurance premium is partially based on the types and degrees of risk covered by your underlying policies, most insurers require that you have a home policy and a car policy.

In most states, umbrella insurance applicants must have a homeowners policy with a minimum of $300,000 in personal liability coverage, plus an auto policy with limits of $250,000 or $500,000 for bodily injury coverage and $100,000 for property damage coverage and uninsured/underinsured motorist coverage (or a single limit of $300,000).

The required limits vary from insurer to insurer, so it's important that you speak with a knowledgeable agent, know the limits on your primary policies, and find out how they correlate to the umbrella coverage you're considering purchasing.

See more detailed application requirements and a get a free quote for umbrella coverage through Esurance.

Tips for driving abroad
You might be a whiz behind the wheel at home, but what about on vacation abroad? Get help tackling foreign rental cars and road rules.

Take a thorough home inventory
Need help figuring out your net worth? Start by taking a simple home inventory with these helpful tips.

Speak to an umbrella insurance expert today. Call 1-855-232-1441 to get your free quote (M–F, 6 a.m.3 p.m. PT)

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