Umbrella Insurance Calculator

The standard advice — carry umbrella cover equal to your net worth — is a rule of thumb about the wrong number. Net worth is an accounting figure; a judgment creditor collects against a legal one, and the two diverge in both directions.

On one side, large parts of a typical balance sheet are unreachable by statute. Every ERISA retirement plan must provide that benefits cannot be assigned or alienated, language the Supreme Court has held effective against creditors in bankruptcy and out of it. IRAs carry their own protection in bankruptcy, capped at $1,711,975 through March 2028 — with amounts rolled over from employer plans not counting against the cap at all. And home equity is shielded up to the state homestead exemption, a figure that ranges from nothing in New Jersey through several hundred thousand dollars in California to unlimited acreage-capped protection in Florida and Texas. A household with most of its wealth in a 401(k) and a Florida house has a large net worth and a small exposure.

On the other side, the balance sheet omits the most durable asset a plaintiff can reach: the earning stream. Up to a quarter of disposable earnings can be garnished under federal law, year after year, for as long as state judgment-renewal rules allow — decades, in many states. A thirty-five-year-old specialist with $200,000 of savings and $400,000 of income is, from a plaintiff attorney’s chair, a multi-million-dollar defendant.

Umbrella policies are excess policies: they begin paying where the underlying auto or homeowners liability limit ends, and they require that underlying limit to be maintained at a stated level — commonly $250,000 or $500,000 for auto. The quote is conditional on the foundation.

Two failures follow from ignoring that condition. The mild one is the gap: an umbrella attaching at $250,000 above an auto policy that stops at $100,000 leaves a $150,000 layer that belongs to you personally on every claim. The severe one is the maintenance clause: carrying less underlying cover than the policy requires is a breach of its terms, and insurers have refused entire claims over it — not the gap, the whole umbrella.

The fix costs almost nothing. Raising auto liability from $100,000 to $250,000 typically costs tens of dollars a month, far less per dollar of cover than the umbrella itself. It is the first phone call to make, before the umbrella is bought, and this page flags the gap whenever the numbers show one.

A million dollars of umbrella cover typically costs between $150 and $400 a year, and each additional million costs less than the one before. Priced per dollar of protection, it is the cheapest insurance a household can buy — a consequence of how rare seven-figure liability judgments are.

The rarity cuts both ways, and the honest framing is the same one this site uses for long-term care: on expected value the premium is likely wasted, and that is what insurance looks like from the inside. The case for the cover lives in the tail — the at-fault accident with a surgeon in the other car, the guest injured at the rental property, the teenage driver — where the judgment lands on a scale no household absorbs. The question is not whether the premium beats its expected payout; it is whether the uninsured version of the bad outcome is survivable.

Two boundaries keep the decision honest. Umbrella policies exclude business and professional liability — a physician’s malpractice exposure and a landlord LLC’s premises liability need their own cover, and pretending the personal umbrella reaches them is the second most common way these policies disappoint. And no policy anywhere covers intentional acts. What the umbrella does add, beyond the limit itself, is defence: legal costs are typically paid by the insurer, often outside the limit — and the presence of visible insurance changes how the other side’s lawyer values the case, which is a protection of its own.