Do you have enough liability insurance to protect your assets, finances, and family, no matter what life throws at you?

Unfortunately, we live in a lawsuit-happy society, where everyone and anyone is at risk for being sued. If you’re sued and found responsible for another party’s damages or injuries, you could be on the hook for hundreds of thousands of dollars—if not even into the millions. Liability insurance can help offer protection against these lawsuits that could cause financial ruin.

In this guide, we’ll help you decide how much liability insurance you need for your home, auto, and other incidents, so you can help ensure you’ve got coverage to help protect you against possible suits or incidents. 

What is liability insurance?

Liability insurance can help cover expenses and lawyer bills if you are sued for another party’s property damage or physical injuries. This pays for the other person’s damages, not your own (except for lawyer bills), if you are found at-fault.

Auto liability can help cover you if you are found responsible for an automobile accident that caused damage to another person’s car, property, or person. For example, let’s say you ran a stop sign and hit a car that was turning. You would likely be responsible to pay for their medical bills and any damages to their car. The amount might be agreed-upon between your insurance companies, or the other party may sue you for their bills as well as additional pain and suffering. Anything that they are awarded, sometimes in the hundreds of thousands of dollars, you would be responsible to pay; your auto liability insurance would help cover the costs up to your limits. 

Homeowners’ liability provides “personal liability.” This covers you if someone is injured on your property, and it can also extend to covering members of your household involved in certain incidents off-property. For example, this could step in to help pay for the medical bills of a delivery man who fell on your icy porch steps and broke his wrist. It could also cover if your dog bit someone at the park, or someone claimed your teenager was cyberbullying. It could even cover property damage if you were visiting a friend’s house and you accidentally broke their expensive vase. Personal liability coverage is pretty extensive in terms of the situations it can cover; but, make sure to chat with your agent to find out what’s included and excluded.

Auto and homeowners’ are the two basic forms of liability insurance. However, you can get other forms of liability through other insurance policies. For example, boat insurance or motorcycle insurance work similar to auto insurance in terms of property damage and bodily injury liability coverage.

How much liability insurance do I need?

There’s a general rule of thumb that applies to all liability insurance:

You need enough liability insurance to protect all of your assets. This includes real estate holdings, savings and checking accounts, investments, college and retirement funds, and even future potential earnings.

Though that’s the “basic rule” of liability, there are a few other variables to consider when determining your liability insurance needs:

  • What are the state requirements for liability insurance (particularly for auto, boat, motorcycle, and RV insurance)? You need to meet the minimum state requirements for liability at least, though we usually recommend more than these minimums to protect all your assets.
  • How risk averse are you? How much peace of mind would you like?
  • Do you have additional risk factors? (discussed below)

Some factors that put you at a higher risk of liability claims:

  • Owning property
  • Renting out your property (active landlord)
  • Employing staff at your home (cleaning, cooking, etc.)
  • Having a trampoline, hot tub, or swimming pool (attractive nuisances)
  • Driving a fast car
  • Driving more frequently
  • Having a high-risk job or owning a business
  • Owning a dog, especially an aggressive breed
  • Being a well-known public figure
  • Volunteering or serving on a board
  • Participating in sports
  • Coaching a sports team (including a child’s one)
  • Hosting large or frequent parties
  • Having a high net worth
  • Having a teen driver in the family

Talk to your InsuraMatch agent to figure out what scenarios could put you at a higher risk of doing damage and/or being sued. They’ll help you find the right coverage limits for your unique situation.

How much auto liability do you need?

There are two types of auto liability insurance: bodily injury liability and property damage liability.

Bodily injury liability concerns physical injuries to another party due to an accident for which you are found at-fault. This would include their hospitalization bills, therapy bills, related medical costs, pain and suffering, or funeral expenses.

Most states require motorists carry bodily injury liability insurance, and the minimums per person and per accident can vary. Your insurance agent will let you know the state minimum to ensure you’re legal on the road.

Most experts recommend carrying at least $300,000 in bodily injury per accident. However, serious car accidents can be hundreds of thousands of dollars, and you could even lose your house in a lawsuit (it does happen). We recommend getting the highest limit you need to protect all your assets and supplementing with umbrella insurance to cover the difference.

Property damage liability covers another party’s damages to their property if you cause an accident. This could be damages to their car, but it also includes other property that your car damages, like a mailbox, sign, lawn, or even their house.=

Like bodily injury, each state has its own required minimum limits for property damage liability. The payout costs for property damage are typically less than bodily injury liability, but they can still be very expensive. If you totaled another person’s car, you would be responsible for the total payout of that car. This could end up being, on average, $50,000. If you caused damage to an exotic or classic car, it could be hundreds of thousands of dollars in damage. A lot of experts will recommend $100,000 in property damage liability, but your insurance agent can help you come up with the right limits based on your risk tolerance and financial worth. 

One mistake could drain you financially, which is why having enough liability insurance is critical to your future lifestyle.

How much homeowners liability do you need?

Most homeowners insurance provides a minimum of $100,000 in personal liability coverage. Some insurance carriers offer up to $500,000 or even a million in personal liability coverage. If this sufficiently covers your assets and you are content with the types of incidents your homeowners personal liability covers, then your homeowners policy is probably enough liability insurance for you.

Learn the ins and outs of homeowners liability coverage here.

If you’ve maxed out your homeowners liability coverage and it does not cover your assets, you’ll want to look into personal excess liability endorsements or umbrella insurance.

Umbrella insurance for more liability coverage

For a lot of policyholders, auto and homeowners insurance liability limits wouldn’t cover all of their assets and potential earnings if they were “cleaned out” in a lawsuit. That’s when an umbrella policy can step in to raise coverage limits for personal liability protection. 

Umbrella insurance is a type of personal liability insurance that can help cover claims that are in excess of your other forms of liability insurance (like home, auto, or boat). The purpose is to make sure your liability limits are high enough to help cover all of your current and future assets, so you’re never at risk of “losing it all.” It can step in after your other liability has been exhausted to pay the remaining balance of the lawsuit.

Best yet, umbrella insurance offers high levels of liability coverage at a low cost—usually only about $150 to $300 annually for a million-dollar coverage policy.  

For example, let’s say your insurance carrier has a maximum homeowners liability limit of $300,000. Your teen has a party (without your knowledge), and there’s alcohol there. One of the kids drives home drunk and gets into an accident. You are responsible, even though you didn’t even know about the party or provide the alcohol, because the party was held at your house. The driver’s bills and the bills of the other party in the accident are $1 million, and a judge states that you are responsible—in full or in part. Your homeowners insurance would pay out $300,000 minus your deductible, and then the rest is on you. That means you have $700,000 left to pay—plus lawyer fees. Imagine what this kind of lawsuit would do to your life. 

If you had umbrella insurance, you’d likely be covered for that remainder. You would only have to pay out your homeowners deductible, and your homeowners liability and umbrella would be able to cover the rest. Phew.

What does umbrella insurance cover?

Umbrella insurance can cover everything that your auto, home, renters, and boat insurance cover, essentially functioning as a supplemental coverage for these policies. But umbrella insurance can also cover other important liability concerns like libel, slander, false imprisonment, dog bites, and more (see some interesting umbrella policy incidents). If you accidentally give everyone at the bake fair food poisoning, it helps cover that. If a business sues you for leaving a bad review, umbrella can help cover that. If your dog pees on your friend’s “priceless” carpet, you’re covered.

Umbrella insurance can also cover other members of your family or household. If your teen driver has an accident on the road, your auto liability can step in first and then umbrella insurance can cover the rest. If your second grader tells everyone it’s a good idea to eat rocks and other parents sue, umbrella insurance may help cover that.

We also like to point out that the accident doesn’t need to involve your home or automobile in order for umbrella insurance to cover your liability. Check out these 8 common liability claims that require umbrella coverage.

You’ll find that umbrella insurance is imperative if you ever have a large lawsuit or claim against you. Although you can’t imagine something like that ever happening to you, it can happen. Having that extra layer of protection and higher coverage limits is indispensable in the most financially devastating moments of life. It’s not an understatement to say that umbrella insurance can save your future.

What does umbrella insurance not cover?

Umbrella is a supplemental personal liability insurance. That means it doesn’t cover any damage to your own property, only the damages or injuries of another party not in your household.

Umbrella insurance also will not cover:

  • Damages that you or a household member cause on purpose
  • Damages incurred in your business or professional life (you’ll need separate business liability)
  • Liability you agreed to assume under a signed contract
  • Liability related to war, armed conflicts, riots, or other acts of violence

What does umbrella insurance cost?

Umbrella insurance is one of the most inexpensive yet comprehensive insurance policies you can purchase. Umbrella policies start at $1 million in liability coverage, and it typically only costs about $150 to $300 per year. You can expect about $75 additional dollars for the next million, and $50 for every following million.

Umbrella insurance offers high limits at a low cost because you have to have your homeowners and auto insurance (or other insurance liability policy) maxed out first. Umbrella only comes into play after those applicable policies have been exhausted. So, it’s only in the rare and most expensive cases that you’d need to use umbrella insurance (but that means you’re likely in boiling hot water with hundreds of thousands of dollars on the line, so umbrella insurance would be indispensable to protecting your assets!) Since the risk of using your umbrella insurance is low, the premiums can also be low. Plus, you’re bundling your umbrella with another policy, so you probably get a bundling discount.

Is there an umbrella insurance deductible?

There is no deductible for umbrella insurance if you first pay your homeowners or auto insurance deductible. For example, you have a max of $300,000 on your homeowners liability policy with a $5,000 deductible. Your dog bites someone and the associated medical bills and pain and suffering awarded to the party costs $500,000. You’d first pay your $5,000 deductible, and then your homeowners would pay the next $300,000. You would still owe $195,000. You’d owe that out of pocket if you didn’t have an umbrella policy to step in to cover the rest.

However, if you are dealing with a liability case that is only covered by umbrella insurance, not your home or auto, you may have to pay a self-insured retention (which is similar to an umbrella insurance deductible). For example, if your homeowners insurance doesn’t cover dog bites but your umbrella insurance does, you’d pay the umbrella self-insured retention before the insurance carrier would pay out the remainder of your claim.

How much umbrella insurance do you need?

Umbrella insurance gives peace of mind on top of your auto, home, boat, and other liability insurance policies. You want enough overall liability, including umbrella, to cover the total value of your assets and net worth, in case you are sued for “everything you have.” (It’s extreme, but it happens!) Work with an InsuraMatch agent to figure out how much umbrella insurance you would need for your unique financial situation by calling us at (844) 824-2885.

Do you have enough liability insurance?

Things happen. “Liability” is almost always an accident or an act of negligence that causes harm (and you then have to defend in court). You don’t mean to cause an auto accident or have a deliveryman fall on your steps or post a negative review that has more serious consequences than anticipated. But life sometimes gets the best of us. The purpose of insurance is to anticipate even the most un-anticipatable events, so you and your family are always protected—come whatever may.

Make sure your home, auto, boat, and other liability insurance liability coverages are high enough to cover your assets. If they’re maxed out and it’s still not enough to give you peace of mind for full protection, consider either an endorsement on those policies and/or an umbrella policy.


Don’t know how much liability insurance you need? Not a problem. Talk to an InsuraMatch agent now at (844) 824-2885 to see how you can add an umbrella policy to your existing insurance!

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