How Much Liability Insurance Do I Need?

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Calculate how much liability insurance you need with our Liability Calculator!

Before we get to the question of ‘How much liability insurance do I need?’, let’s talk about something that may be assumed to be related to it but actually isn’t.  When you hear the term ‘full coverage,’ what does it mean to you?  Does it mean that you expect everything to be covered in an auto accident no matter what?  Does it mean that your policy will pay for any injury, no matter what the cost?  Or does it mean that you will have physical damage coverage on your vehicle (which is how it is most commonly interpreted in the insurance world).

Full coverage is quite a scary term, when you think about it.  You could have ‘full coverage’, but still have a state minimum policy.  If this were the case and you caused a severe accident, your car would be covered – but your policy would only pay up to $25,000 (depending on what state you live in) – and you’d be on the hook for the rest if the injury were severe enough to cost more than that.  And you know that in all likelihood it would be.

To address that concern, what you actually need to focus on is your liability insurance.

So how much liability insurance do I need?  This is a very popular question, and it seems to have a different answer depending on who you talk to.  Some experts suggest you carry the state minimum limits.  Others suggest carrying at least $100,000.  Others suggest that whatever liability limit you carry on your home/renters and auto policies, you should also carry a $1 million umbrella liability policy for worst case scenarios.

But how did they arrive at those totals?

Who decides what is ‘enough’ liability insurance versus ‘too much?’

Did anyone actually bother to ask you what your risk is to help determine what that number should actually be for you?

Before we jump in, a word of caution.  This calculator is meant to help you calculate the risk you have – meaning what you stand to lose.  This article and calculator is meant to be a guide to show you what your total current and future assets are so that you can protect them as best you can.  Nobody can predict how a major claim will turn out – but the very best you can do is protect yourself and your family by insuring for the worst-case scenario.  Isn’t that what insurance is for, anyhow?

Also, keep in mind that this will likely be a moving number that you will want to review with your agent at least every other year, or whenever you have a major life change.  New job, huge raise, marriage, etc – that will affect this number.

Back to the question:  How much liability insurance do I need?  You will want to determine what you have first – and that is what our calculator is here for.  It will give you a quick idea of what you have and will have so that you can make a more accurate determination of your risk.

We’ve based this calculation on 5 things.  Let’s go through them here – and keep in mind that this is per HOUSEHOLD, not per PERSON:

  1. Total Equity in Your Home:  How much is your house worth?  We’ll put that in the first box, but you’ll want to put the total value of your home here.  If you are a renter or do not own a home, you may skip this box.
  2. Total Personal Property:  How much stuff do you have?  I realize this could be difficult to calculate, but do your best for now.  And honestly, it may not be a bad idea to go through your house and document what you have in case you have a claim – even if it’s simply walking through the house recording a simple video of it.
  3. Total Investments:  Any investments in property, IRAs, stocks, etc., not including your checking and savings.  We’ll save that for next.  Put the total value in this box.
  4. Total in your checking/savings:  Pretty self-explanatory.  Just put in the amount you have right now.
  5. This one is a little more complicated, but we do the math for you in the calculator.  Take your annual income and multiply it by the number of years you plan to work yet.  That will tell you what your current future risk is.  This number will likely change the most as you have career changes, but we recommend revisiting this calculator every other year or every time you have a major life change.  If you are retired, you will put 0 for both.

That’s it!  That’s a brief description to the ‘How much liability insurance do I need’ question.

Are you ready to calculate your own?


In summary, we hope this clarifies the liability insurance question for you a bit.  Now that you are armed with this information, are you ready for a quote?  You may be surprised to find that adding liability coverage to your policy isn’t as pricey as you might think it is!

When you’re ready, begin here to start your quotes! 


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