How much liability coverage your assets and future income actually need.
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Professional Financial Tools
8/25/2026
Brokerage and bank accounts. Retirement accounts are entered separately because they are treated very differently.
ERISA-qualified plans such as a 401(k) have broad federal creditor protection. IRA protection is set by state law and varies widely. Only partly counted below.
A judgment above your coverage can be satisfied by garnishing future wages, so income is exposed even if your balance sheet is thin.
Federal law caps garnishment at 25% of disposable earnings; many states cap it lower. 15% is a middle assumption.
The per-occurrence bodily injury limit on your auto policy. Most umbrella carriers require at least $250,000-$300,000 underneath.
Each of these materially raises the odds of a large liability claim, and carriers price and underwrite for them.
Umbrella policies are sold in $1 million increments, so this rounds up to the next whole million. The floor is $1M because that is the smallest policy sold and because the cost difference between $1M and $2M is typically small relative to the first million. This is an estimate for planning, not an insurance quote. Actual pricing is set by the insurer or, in promulgated-rate states, by the state regulator.
Exposed assets of $425,000 plus $450,000 of future wages at risk ($120,000 x 15% x 25 years). Retirement accounts are counted at only 25% of value — ERISA-qualified plans like a 401(k) have strong federal creditor protection, but IRA protection is set by state law and is not universal, so they are not disregarded entirely.
Your umbrella sits on top of your auto and home liability, and it only pays once the underlying policy is exhausted. The binding number is the LOWER of the two limits ($300,000 auto, $300,000 home), because a claim on the weaker policy is where the gap opens.
This is what a judgment above your current liability limits could reach: your equity, your investments, and your future paycheque. Umbrella coverage is priced per million and is among the cheapest coverage sold, precisely because large claims are rare.