How Much Liability Coverage Do You Actually Need?

Your property coverage handles what you own: the car, the house, the contents inside it. Liability is a different job. It pays for harm you cause to someone else, and it pays for the attorney who defends you when someone says you did.

Here is the part that rarely gets explained. When your liability limit runs out, the obligation does not. If a judgment against you is larger than your policy, the difference is yours to cover. That single fact is the whole reason this number matters.

Minimum limits verified August 2026. These are the statutory minimums each state requires, not what we recommend you carry. States change them from time to time, so if you are reading this well after that date, ask us to confirm before you rely on it.

Read those numbers again. Twenty five thousand dollars is not a lot of money in a hospital.

It is worth knowing what has happened to the cost of injury claims. The Insurance Research Council studied 7.4 million auto injury claims and found the average bodily injury payment rose from roughly $14,000 in 2017 to more than $20,000 by 2022, an annualized increase of 7.8 percent that outpaced medical inflation over the same period.

That is the average claim. Not a bad one.

State minimums are a floor set by legislators. They are not a recommendation, and nobody who set them has looked at what you own.

Your real exposure is two things added together.

What you own today

Equity in real estate. Savings and investments held outside retirement accounts. Anything with a title on it. Some assets carry legal protections that vary by state, and that is a question for an attorney rather than an agent, but the working number is what a judgment could realistically reach.

What you will earn tomorrow

This is the one almost everybody forgets, and for most working households it is the larger of the two.

A judgment does not stop at your bank balance. Under federal law, a creditor can generally garnish the lesser of 25 percent of your disposable earnings or the amount by which those earnings exceed thirty times the federal minimum wage. Individual states are allowed to be more protective, and several are. But the principle holds: a large judgment can follow your paycheck for years.

That is exactly why our worksheet asks you to run annual income, times ten years, times 25 percent. It is not a scare tactic. It is a rough sketch of the wages a judgment could reach.

Add the two together and you have the number your liability limits should be covering. For a lot of households it lands somewhere between $500,000 and $3 million, and almost nobody guesses it correctly on the first try.

The worksheet walks you through real estate equity, future wages and the life insurance you already have. You do not need to gather documents or know any terminology. Round numbers are fine.

We read every one that comes in and tell you what we see. No pressure, no obligation.

Three steps, in this order.

1. Raise the underlying limits first

Your auto and home policies carry liability limits of their own. Moving auto liability from the state minimum up to something like $250,000 / $500,000 usually costs far less than people expect, because the expensive part of an auto policy is the coverage on your own vehicle, not the liability on someone else’s.

2. Put an umbrella on top

An umbrella policy sits above your auto and home liability and picks up where they stop. Insurers require certain underlying limits before they will sell you one, commonly $250,000 / $500,000 on auto and $300,000 to $500,000 of personal liability on the home policy. That requirement is the reason step one comes first.

3. Look at the cost before you decide against it

Nationally, a $1 million personal umbrella averages around $383 a year, with roughly $75 for each additional million after that. Your actual price depends on drivers, vehicles, properties and history, so treat those as a starting point rather than a quote. But measured per dollar of protection, an umbrella is almost always the least expensive coverage on the whole policy.

Most people trying to control cost start by lowering their liability limits. That is backwards.

Raise your deductibles instead, and use the savings to buy the liability you actually need. A higher deductible costs you a few hundred dollars on a claim you might have. Thin liability limits can cost you everything you own and a decade of wages on a claim you hope you never have.

You are trading a small, survivable, likely expense for protection against a large, unsurvivable, unlikely one. That is what insurance is for. Spending your premium the other way around is the most common expensive mistake we see.

Send the worksheet and we will read it. Not to sell you the largest policy we can write, but to tell you where the gap is and whether it is worth closing.

Sometimes the honest answer is that you are already in decent shape and should leave it alone. When that is true, we will say so. When there is a real gap, we will show you what it costs to close and let you decide what you want to do about it.

You should be able to know where you stand. That is the entire point.

This page is general information, not legal or financial advice. Coverage terms, exclusions and availability vary by policy and by state, and what any policy does in a specific situation depends on that policy’s language. State minimum requirements were verified in August 2026; cost figures are national averages as of the same date and are not quotes. Corey Benson Insurance Agency is licensed in Oregon, Washington, Idaho, Montana and Arizona.