You need enough umbrella insurance to make up the difference between your liability insurance limits and your net worth, in order to protect your assets if you are faced with a major liability claim or lawsuit. Umbrella insurance limits usually start at $1 million and can go as high as $10 million, depending on the insurer.
A basic $1 million umbrella policy typically costs between $150 and $300 annually, with each additional $1 million in coverage adding up to $75 to the price. Since the cost is relatively inexpensive, it’s usually best to err on the side of getting too much umbrella insurance rather than too little.
Recommended Umbrella Insurance Coverage
It’s generally recommended that you buy enough umbrella insurance to cover your assets, including your home equity, personal savings, and retirement accounts. For instance, if your assets equal about $700,000, it’s a good idea to buy $1 million in umbrella insurance, since this is usually the lowest amount available.
Besides your own finances, you should also consider things that could increase your odds of being liable for someone’s injuries at some point, including owning a dog or having a teenage driver in your household.
Ultimately, it’s important to remember that if you don’t have enough insurance to cover your net worth, your assets could be seized to cover damages that exceed your liability insurance limits. Because of this, umbrella insurance is usually a wise investment for individuals with a particularly high net worth.
To learn more, check out WalletHub’s guide to umbrella insurance.
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