Umbrella Insurance – How to Calculate

February 27, 2013

An umbrella policy is a liability insurance policy that takes over where basic liability insurance policies leave off. An umbrella policy usually has a liability limit of $1 million or more, which is added on top of the limit for any other policy, such as a homeowner’s policy that covers liability. Umbrella insurance protects the assets and future income of the policy holder above and beyond the standard limits set on their primary policies.

There is not a specific formula to use to calculate the amount of umbrella coverage one needs. It may be the case that umbrella coverage is not required if one does not have a substantial income or possess many assets or property. However, if one has a high income, large assets, and property then the following guidelines for coverage will help.


  • The worth of your home and any other real property
  • The worth of all vehicles that you own including planes and boats
  • Any other expensive personal belongings that you own
  • Your average income for the past 5 years

Umbrella insurance helps protect your assets and future income by providing coverage in the case of liability damages that exceed your car insurance or homeowner’s policy. It is important to note that personal umbrella policies usually do not cover liability related to business and professional activities. To obtain an umbrella policy an individual must first have primary insurance that provides at least minimum amount of coverage.

For assistance in evaluating whether or not you need umbrella insurance please contact one of the licensed agents at Dave Terpening Insurance Agency, Inc. at  1-800-585-1776.

Post author Loren Pleet