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What Is Personal Liability Insurance?

Personal liability insurance is necessary coverage that could prevent you from paying out-of-pocket for someone’s medical expenses or legal fees if there’s an injury in your home.

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In the case that you, an immediate family member, or even your pet is held legally responsible for someone’s injury or property damage while they’re at your home, personal liability insurance provides coverage to pay for claims that are made against you.

For example, if someone injures themselves in your driveway, you may be liable for their medical expenses if you’re found negligent in keeping your driveway paved and maintained. Or, if your dog bites and injures someone, you could end up with a claim against you.

This insurance is a part of a homeowners insurance policy as well as other umbrella policies for extra liability protection. Bear in mind that personal liability insurance is necessary coverage not only for homeowners, but for individuals with condo and renters insurance as well.

What Does Personal Liability Insurance Cover? 

Damages that personal liability insurance covers include: 

  • Legal expenses that may result in lawsuits 
  • A houseguest’s medical expenses due to your negligence
  • A houseguest experiencing bodily injury from you, a household member, or a pet
  • You, a household member, or a pet causing property damage to someone else’s home

Oftentimes, personal liability insurance may already be included in your homeowners, condo, or renters insurance. This coverage protects your financial assets because instead of paying out-of-pocket for someone’s medical expenses or legal fees, your insurance may help pay the claims someone puts against you.

What Doesn’t Personal Liability Insurance Cover? 

There are claims that personal liability insurance may not cover, such as:

  • Bodily injury to you or anyone in your household 
  • Auto accidents
  • Business-related accidents — Any injuries or claims related to your job will be covered by your business insurance policy. 
  • Intentional damage or injury that you or a household member have caused

If you operate a home business or own a dog breed that is excluded from personal liability coverage, you may consider general liability insurance. Similar to personal liability insurance, general liability insurance covers the costs of medical or legal expenses if a customer gets injured on your business’s property, which includes home businesses. 

How Does Personal Liability Insurance Work? 

If a guest experiences injury or you cause damage to someone’s property, you may have to file a claim with your insurance company. An investigation may occur by the insurance company to prove your negligence to your guest. If negligence cannot be proved, your claim may be denied.

Homeowners insurance is a type of property insurance that also includes coverage ranging from natural disasters to personal property damage. Personal liability insurance, also known as Coverage E, is included when you purchase homeowners, condo, or renters insurance. Other coverages that may be included in a homeowners insurance policy are:

  • Coverage A, or Dwelling Insurance: Dwelling insurance may help repair a home in the case of a covered peril. Common perils include fire and smoke, water damage, lightning strikes, and windstorms or hail. Other perils include theft and vandalism. 
  • Coverage B, or Other Structures: Other Structures coverage may help replace or repair structures outside of your home such as a fence, garage, or gazebo. For example, if a tree fell on your garage, the Other Structures policy may provide coverage to repair it. 
  • Coverage C, or Personal Property Protection: Personal property protection coverage protects your personal belongings, such as your clothes, furniture, and appliances from theft or damage due to a peril. 
  • Coverage D, or Additional Living Expense: Additional living expense coverage could help you live somewhere else temporarily if your house is being repaired. For example, if your house was damaged by a tornado or fire, an additional living expense coverage may help with expenses such as hotel bills and restaurant meals. 
  • Coverage F, or Medical Expense to Others: This coverage covers medical expenses sustained by someone who isn’t you, a household member, or your pet. 

How an Umbrella Policy Could Supplement Your Personal Liability Insurance 

An umbrella policy is an additional liability policy that you could purchase outside of a homeowners insurance policy and may use towards both auto and property insurance. If your personal liability coverage has exhausted its coverage limit, you may use an umbrella policy to pay the remaining cost of your claims.

For example, if a guest fell down the stairs and injured themselves, they may sue you for medical expenses, negligence, and lost wages. If your guest is in the hospital for an extended period of time with severe medical attention, your personal liability coverage may reach its coverage limit.

After it does, you may start your umbrella insurance policy to extend the coverage limit. You may want to consider umbrella policies if you have other family members who live with you. If your spouse or children do not have auto or property insurance in their own name, you may extend an umbrella insurance policy to protect them from claims. 

How Much Personal Liability Coverage Do You Need? 

The amount of personal liability coverage that you may need varies on the individual and the total value of financial assets that you have. Standard homeowners policies provide a minimum of $100,000 of personal liability coverage. However, it’s recommended to get about $300,000 to $500,000 of personal liability coverage.

You may have to consider your net worth, assets, and retirement funds to get an accurate amount best suitable for you. Children and teenagers could be a factor in your coverage as well, as they’re at higher risk of accidents.

In the event that you’re in a lawsuit and your personal liability coverage has reached its limit, the court system could take your remaining assets to supplement what’s left. To financially protect yourself and your family, an umbrella policy may be beneficial to extend financial coverage if needed.