The fundamental purpose of an umbrella insurance is to protect your asset in the event of being sued.  An umbrella insurance policy is extra liability insurance coverage that goes beyond the limits of the insured's home and auto insurance.

Based on the umbrella insurance policy definition, almost every family needs an umbrella insurance to protect their assets in the event of being sued by other people for the amount exceeding the original insurance policy coverage. 

For example, if you have a car and you were involved in an accident, you hit someone, that person sued you for $1M and your auto insurance only covers up to $300K.  At this time, your umbrella insurance will help to protect your asset and the policy will cover the judgement.

How much coverage do I need for an umbrella insurance policy?  The rule of thumb is to add all your asset up excluding your 401(k) retirement accounts since they are shield from liability lawsuits，and also minus your home and car insurance policies' liability coverage amounts.  The remaining figure of your asset should be the coverage amount of your umbrella insurance. 

Since I wrote this blog in 2018, the assets of my targeted families have been risen a quite bit.  In this case, a family with 5 million asset excluding the above mentioned numbers, I would buy an umbrella policy with 2 or 3 million coverage.