What is Personal Liability Insurance?

Personal liability insurance is a component of homeowners insurance that provides coverage for legal responsibility for bodily injury or property damage caused to others.

A Longer Definition: Personal Liability Insurance

Personal liability insurance is an add-on to a standard homeowner insurance policy. It protects homeowners from legal responsibility when bodily injury or property damage to others happens on the homeowner’s property.

Personal liability insurance covers the homeowner and other family members living in the household.

Personal liability coverage typically includes legal defense and award payments if a homeowner is sued, up to the policy’s limit. Personal liability insurance does not cover intentional damage or injuries caused by the policyholder or covered family members.

It also excludes liability related to auto accidents, which is typically covered under auto insurance policies.

Personal liability insurance protects against unforeseen incidents that would otherwise result in large financial losses. It’s especially important for homeowners who host block parties for neighbors or friends often, or have swimming pools, backyard ice rinks, and trampolines.

Personal Liability Insurance: A Real-World Example

Imagine a first-time homeowner hosting a birthday party for their child. They own a trampoline, which quickly becomes the main attraction for the kids at the party. Unfortunately, one of the other children jumps awkwardly and gets seriously injured.

Following the incident, the injured child’s parents hold the homeowner responsible for their child’s medical costs and their lost time at work due to caring for their child. They file and win a lawsuit seeking compensation for these expenses.

In this situation, the homeowner’s personal liability insurance covers the legal costs to defend against the lawsuit and the settlement payment awarded by the court up to the policy limits.

Without the coverage, the homeowner would have to bear all the costs themselves, impacting their savings and other financial resources.

Common Questions About Personal Liability Insurance

How much personal liability insurance should I have?

The amount of personal liability insurance you should have depends on your assets and risk exposure. Generally, it’s recommended to have enough coverage to at least equal your net worth.

Does personal liability insurance cover all accidents on my property?

Personal liability insurance covers accidents where you are held legally responsible. It doesn’t cover intentional acts or business-related activities.

Is personal liability insurance included in all homeowners policies?

Personal liability coverage is a standard part of most homeowners insurance policies. Homeowners can choose whether additional coverage beyond the standard amount is necessary.

What’s the difference between personal liability insurance and medical payments coverage?

Personal liability insurance covers legal responsibilities for injuries and damages to others, while medical payments coverage pays for medical expenses of guests injured on your property, regardless of fault.

Can I increase my personal liability coverage limits?

Yes, you can increase your personal liability coverage limits. It’s often advisable to review your coverage limits periodically, especially if your financial situation changes.