Personal Liability Insurance

Learn more about the personal liability coverage provided by a home insurance policy, as well as how to pick liability coverage limits.

Personal liability occurs when you are held legally responsible for an accident that occurs in or outside of your home and results in bodily harm or property damage. If a guest is hurt on your property, personal liability claims could include medical bills, legal fees, and more, as well as coverage for accidental damage you are legally responsible for on someone else’s land. You may be able to avoid paying out of pocket for occurrences like these if you have personal liability insurance, up to your coverage limits. Personal liability coverage is an important part of your home or renters insurance policy for this reason.

The legal obligation is an unavoidable part of modern life. It is, without a doubt, the greatest significant financial risk that most people confront. Common occurrences, such as a car accident or a neighbor’s youngster tripping on a kitchen floor, can end in lawsuits with astronomically large damages awards. Most individuals and families could risk financial ruin if they do not have liability insurance.

Personal liability insurance should normally be sufficient to cover the value of your assets (everything you own). If your insurance coverage is insufficient to satisfy the amount owing on the settlement, the injured party may be able to seize your assets and future earnings.

Personal liability insurance may also be required by state law. Some states, for example, have mandatory vehicle liability insurance regulations that require car owners to carry liability insurance as a condition of licensing or use on public roads. After an accident, some states require car owners to establish financial responsibility.

Now that you know what personal liability insurance is, consider the following scenario: a guest visits your home and gets struck by a falling ladder while walking through your garage. The guest breaks his arm and sues you for compensation – which might be thousands of dollars. Personal liability insurance can help in this situation. Up to the maximum of your liability policy, personal liability will cover the costs of medical bills as well as legal defense fees. Personal liability insurance, on the other hand, may be able to cover an occurrence that occurs outside of your home or property.

What is personal liability insurance?

Let’s start at the very beginning of this discussion.

In daily language, the term “personal liability” refers to the fact that someone is legally liable for something. In the context of renters and homeowners insurance, it refers to instances in which you are accountable for bodily injury or property damage. Finally, ‘personal liability coverage’ is something that is included in your renters or homeowners insurance policy that covers you if you are held legally liable for something that happens to someone else. This coverage is included in your renters or homeowners insurance policy.

So, when does personal liability insurance begin to payout?

Here are a couple of such examples:

  • Someone has been injured on your property, and you are to blame.
  • You unintentionally inflict damage to someone else’s property or place of business.
  • Someone (or their pet) named on your insurance coverage causes harm to someone else.

Fortunately, if any of these three things occur, personal liability insurance will cover the expense of retaining an attorney to defend you, as well as the costs of repairing any harm you caused to others. If you are judged legally accountable for hurting or destroying someone else’s property, personal liability insurance can assist you in covering the costs of any expenses resulting from the occurrence (legal fees, medical expenses, repair bills, etc). Incidents that occur both on and off your property are covered under your insurance policy.

Why would someone require the services of an attorney?

Consider the following scenario: your dog bites your neighbor, Harry. If you do not provide Harry with your insurance information (either because you are uncomfortable doing so or because you do not have the opportunity to do so), he may hire a lawyer to send you a letter informing you that Harry is pursuing the claim and that if you do not provide your insurance information within 30 days, Harry will take you to court.

If this occurs, here is what you should do to protect yourself:

  • Provide the contact information for your lawyer to your insurance provider so that your insurer can contact them on your behalf.
  • Make a liability claim, and send Mike your claim number as well as the contact information for your adjuster.

In order to make use of your personal liability insurance, you must first register a claim with your insurance provider. In order for your claim to be recognized, it must be demonstrated that you were negligent in causing the injury or property damage. If your insurance company cannot establish that you were negligent, the claim will be denied.

As an example, if your dog attacks and bites someone who is walking past your property, this would be a clear case of carelessness on your part because you were not properly leashing the dog, and your insurance company would very certainly approve the claim. However, if a meal delivery worker trips over their own feet while walking to your front door and sustains injuries, it would not be considered a clear example of negligence on your part, and any culpability claim would be refused.

Understanding personal liability insurance

Liability insurance, sometimes known as “third-party insurance,” is a comprehensive coverage category that includes personal liability insurance. There are several types of liability insurance, but they all have one thing in common: they cover accidents that happen to other people that you unwittingly cause or for which you could be held liable.

Personal liability insurance, as the name implies, protects an individual from responsibility claims originating from bodily harm or property damage caused by personal activity.

Personal liability insurance can be obtained in three ways:

Your homeowners, renter’s, or dwelling insurance policy includes it. This policy, sometimes known as “comprehensive personal liability,” is included in most personal insurance policies.

Individuals who do not own or rent physical property (and thus do not require homeowners insurance) frequently purchase it as a stand-alone policy.

It is frequently added to an existing policy, such as a personal auto or watercraft insurance policy.

Personal liability coverage isn’t restricted to insured premises when it’s included in a home’s insurance. It’s possible that the coverage will expand to occurrences that occur elsewhere. Subject to certain exclusions, the policy compensates for personal injury or property damage caused by an incidence covered by the policy. Attorney fees, court costs, and any settlements up to the amount indicated in the insurance policy are often covered.

What is a personal umbrella policy?

A personal umbrella policy, often known as umbrella insurance, is a type of liability coverage that you can add to your house insurance policy. If your homeowners insurance’s liability coverage is exhausted during a claim, your personal umbrella policy kicks in to cover the remaining costs.

Umbrella coverage for individuals is often sold in $1 million increments, with a maximum limit of $5 million. For the bare minimum of coverage, policies normally cost roughly $300 per year. Personal umbrella coverage may be worthwhile if you have more than half a million dollars in combined assets.

What does personal liability insurance cover?

If you or a family member is legally accountable for physically harming someone or damaging their property, personal liability coverage will cover the costs. Your coverage can assist pay for medical bills, attorney fees, court costs, and any property damage settlements if you’re ever found to be at fault for an accident.

Personal liability coverage under your basic homeowners insurance or renters insurance policy may protect you in the following situations, up to your policy limits:

  • If you are involved in an accident, you may face legal action.
  • An individual’s bodily harm
  • Damage to property as a result of your carelessness
  • Other people’s medical payments (above $5,000 because that’s what your medical payments coverage is for)
  • Other people’s property damage perpetrated by members of your family
  • Other people’s property damage caused by your dogs

Body injury

The following are some types of harm claims that may be covered by your personal liability insurance:

  • A passerby or a houseguest is bitten by your dog.
  • A visitor is hurt while playing in your pool or trampoline.
  • While cleaning your firearm, it accidentally discharges, injuring a neighbor or visitor.
  • On your slippery walkway, a meal delivery person slips and collapses.

Damage to property

Personal liability insurance can also protect you if you cause damage to another person’s property. If a visibly dead tree in your yard falls on your neighbor’s house, for example, you could be held personally accountable for the tree’s removal as well as any damages to their property. Your insurance may agree to compensate your neighbor for damages if your neighbor (or you) can prove negligence on your side, either through evidence of prior knowledge or the clear and evident state of the tree.

To begin with, personal liability insurance only covers bodily injury to others; it does not cover you or those insured by your policy. Second, your insurance only covers unintended incidents. So, if you get furious and punch someone in the face (ouch! ), your liability policy won’t cover his medical bills or your legal fees if he sues you.

If your policy’s liability limits are insufficient, you may want to explore supplementary coverage, such as personal umbrella liability insurance, which adds an extra layer of protection against personal responsibility. If you have a serious auto accident or an accident on your property that exceeds the limitations of your insurance, this will help cover the costs.

Personal liability coverage is often limited to $100,000 to $300,000 on homeowners insurance. Umbrella policies fill in the gaps left by these limits, providing $1 million or more in personal liability coverage. Libel, slander, and malicious prosecution are examples of liability claims that homeowners insurance may not cover. They’re most effective, though, if your homeowners policy limits are less than the injured party’s claim and/or the legal costs associated with it.

Does homeowners insurance cover personal injury?

Personal injuries are covered by homeowners insurance if your policy contains personal liability coverage, which most do. However, your personal liability insurance will not cover every injury. The only injuries that are covered are those that occur as a result of your own fault. As a result, your personal liability insurance does not cover intentional acts. Furthermore, your personal liability insurance only covers other people’s injuries, whereas any personal injuries would be covered by health insurance.

What isn’t covered by personal liability insurance?

While your typical homeowners or renters insurance will cover some personal liability claims, you may not be covered for others, such as:

  • As a result of a car accident, you may be held liable (this will typically be covered by your auto insurance)
  • Intentional bodily harm or property damage inflicted by you or a family member in your home
  • Injuries or property damage suffered by you or your family in your home
  • Claims relating to your profession or business operations

Make sure you thoroughly research your homeowner’s or renter’s policy, so you know exactly what is and isn’t covered by personal liability insurance. Contact a Nationwide agent or receive a home insurance quote immediately if you don’t have personal liability coverage for your house. Choose the correct personal liability policy limit for you and get the coverage you require.

How much does personal liability insurance cost?

Purchasing a higher level for personal liability coverage is reasonably affordable. This is particularly true when contrasted to other changes to homeowners insurance, such as expanding dwelling coverage. The cost of expanding your personal liability coverage limits on a sample home with a $200,000 State Farm policy is shown in the table below.

Personal Liability Coverage Annual Homeowners Insurance Rate Cost of Increased Coverage
$100,000 $4,339
$300,000 $4,354 $15
$500,000 $4,364 $10
$1,000,000 $4,374 $10

It just costs $15 more per year to triple your personal liability coverage. Keep in mind that the actual cost will vary depending on a variety of circumstances, including the location of your home. However, increasing your personal liability coverage limits should not result in a significant rate hike.

The cost of personal umbrella liability insurance remains low, despite the fact that umbrella policies provide substantially higher coverage limits. A personal umbrella liability policy can cost anything from $150 to $300 per year for $1 million in coverage. Keep in mind that a personal umbrella policy provides extra coverage, which means it kicks in after your homeowners or vehicle insurance has been exhausted.

How much personal liability insurance do I need?

The total amount of your assets, or the total value of everything you own, should be the limit of your personal liability insurance coverage. If you own two houses worth $400,000, for example, you have $400,000 in real estate assets that you need to safeguard with liability insurance.

The more your financial holdings, the more liability coverage you should buy. To reduce the danger of financial loss if you are sued, your liability coverage limit should be as high as you can afford.

For example, if your net worth is $600,000 and you’re sued for $400,000 in damages but only have $100,000 in insurance, the plaintiff can go after your assets to settle the remaining $300,000 in damages. If you have a large net worth, plaintiffs are more inclined to pursue you because you are better equipped to pay a judgment.

Category Amount
Personal Liability Coverage $100,000
Personal Injury or Property Damage Claim Brought Against You ($400,000)
Recoverable From Personal Assets $300,000

Consider getting an umbrella policy or personal excess liability insurance if you have $100,000 or more in assets. Both are extra coverage options with a greater limit.

In other words, after your homeowners coverage limitations have been exhausted, an umbrella policy and personal excess liability insurance kick in. Personal excess liability insurance adds coverage to the underlying policy, but an umbrella policy gives larger coverage.

An umbrella policy or personal excess liability insurance would kick in for the remaining $300,000 in the situation above, protecting your assets. Keep in mind that your coverage limits will be determined by your insurance.

How do personal liability insurance policies work together?

Let’s say your homeowners insurance policy’s personal liability coverage is limited at $300,000. In addition, you have a $1 million personal liability umbrella insurance coverage. For a covered incident, you’re sued for $800,000, and the plaintiffs win.

You’ll start by paying your $1,000 deductible on your home’s insurance. The next $299,000 of the judgment will be covered by your home’s insurance, bringing you to the policy’s maximum of $300,000. The remaining $500,000.00 will be covered by the umbrella policy. Thanks to your large quantity of comprehensive personal liability coverage, you won’t have to come up with the half-million from your personal assets.

What is personal liability insurance for renters?

A common renters insurance policy includes personal liability coverage. If you’re proven legally accountable for another person’s injuries or property damage, it could assist pay for their medical bills or property repairs. If you’re sued for an incident that occurs while you’re renting, renters liability insurance may be able to help cover your legal costs.

According to the Insurance Information Institute, renters insurance liability coverage normally starts at a $100,000 limit for claims or lawsuits. Increasing your tenants liability limits may allow you to acquire additional coverage.

Personal liability insurance for business

Business liability insurance safeguards a company’s assets and pays for legal duties such as medical expenses incurred by a customer injured on store property, as well as any on-the-job accidents received by staff. Liability insurance also covers the expense of a firm’s legal defense as well as any settlement offers or awards that a corporation is required to pay as a result of court judgments. Compensatory damages, non-monetary losses sustained by the aggrieved party, and punitive damages are all possible costs.

General liability insurance protects businesses that rent the commercial real estate property in which they operate against liability resulting from damage caused by fire, mold, floods, or other natural disasters.

Finally, accusations of incorrect or misleading advertising, such as libel, slander, and copyright infringement, are covered by commercial liability insurance.

Bottom line

If you’re ever found legally responsible for someone’s injury or property damage, personal liability insurance is the only way to secure your financial future. You’ll need enough personal liability coverage to cover the complete worth of your home and other valuable assets if you own them. If someone is hurt and you’re found to be at fault, and you don’t have personal liability insurance, you’ll be legally obligated to pay the entire settlement out of your own pocket.

Charles Bains

Charles Bains

Charles Bains started his insurance career as a marketing intern before pounding the pavement as a commercial lines agent in Orlando, FL. As an industry journalist, his articles have appeared in a variety of trade publications. His insurance television career, short-lived but glorious, once saw him serve as the expert adviser on an insurance-themed infomercial (yes, you read that correctly). Having recently worked for various organizations, coupled with his broader insurance knowledge, Charles is able to understand our client’s needs and guide them accordingly. He is a gem for Insurance Noon as his wide area of expertise and experience have been beneficial in conducting further researches to come up with solutions and writing them in a manner which is easy for everyone including beginners to comprehend.