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 addition to a standard homeowners insurance policy. It provides coverage for legal responsibility when bodily injury or property damage to others occurs on the homeowner’s property.

Personal liability insurance typically provides coverage for the homeowner and other family members living in the household.

This coverage often includes legal defense costs and award payments if the homeowner is sued, up to the policy’s limit. Personal liability insurance does not provide coverage for intentional damage or injuries caused by the policyholder or other covered family members.

It also does not provide coverage for liability related to auto accidents, which is generally covered under auto insurance policies.

Personal liability insurance provides protection against unforeseen incidents that could result in significant financial losses. It is particularly important for homeowners who host gatherings often or have features like swimming pools, trampolines, or backyard ice rinks on their property.

Personal Liability Insurance: A Real World Example

Imagine a first-time homeowner hosting a birthday party for their child. They have a trampoline, which quickly becomes the main attraction for the children at the party. Unfortunately, one of the other children lands awkwardly and suffers a serious injury.

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

In this scenario, the homeowner’s personal liability insurance would provide coverage for the legal defense costs and the settlement awarded by the court, up to the policy limits.

Without this coverage, the homeowner would have to bear the full financial burden, 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 needed depends on your assets and potential risks. In general, it is recommended to have coverage that at least matches your total net worth.

Does personal liability insurance cover all accidents on my property?

Personal liability insurance provides coverage for accidents where the homeowner is held legally responsible. It does not provide coverage for 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 to increase coverage limits beyond the standard amount if needed.

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

Personal liability insurance provides coverage for legal responsibilities related to injuries or property damage. Medical payments coverage pays for the medical expenses of guests injured on the homeowner’s property, regardless of fault.

Can I increase my personal liability coverage limits?

Yes, personal liability coverage limits can be increased. It is a good idea to review coverage periodically, especially if there is a change in financial circumstances.