Personal Liability Insurance: Everything You Need to Know

Some of the most expensive homeowner’s insurance claims are liability losses. These claims can result in several million-dollar payouts. If you find yourself caught in a lawsuit, you might be responsible for legal costs, pain and suffering, medical bills, rehabilitation, and many other qualifying expenses. Most homeowners cannot pay these costs out of pocket, so they choose to purchase personal liability insurance.

Understanding Personal Liability Insurance

Personal liability insurance covers you if you are sued for destroying another person’s property or injuring someone. Personal liability insurance is usually an add-on coverage included in residential insurance policies such as renter’s insurance, homeowner’s insurance, or condo insurance. However, you might be able to purchase this coverage as a stand-alone policy from a qualified insurance agent, according to Investopedia.

Several homeowner’s insurance plans come with $100,000 in personal liability insurance. The $100,000 limit means your insurance provider pays up to $100,000 per injured person per incident. If you believe your built-in liability insurance limits are too low, you can purchase higher limits. If you want coverage beyond your primary liability plan, consider buying an umbrella policy.

What Does Personal Liability Insurance Cover?

A personal liability insurance plan covers situations that might leave you financially responsible for injuries that happen on property you own. In some cases, you could be legally responsible for incidents that occur on a property you don’t own.

For example, a friend visits your home and gets hit by a falling light fixture. Your guest receives several lacerations and files a lawsuit against you for the injuries amounting to several thousand dollars. Your personal liability policy will cover the cost of medical bills and your legal fees in this situation. Your personal liability coverage might also protect you from legal responsibility for injuries and damage that occur off your property.

Travelers lists the most common things a personal liability insurance policy covers:

  • Bodily injury directly caused by negligence.
  • Property damage directly caused by negligence.
  • Bodily injury from a traffic accident.
  • Property damage caused by a traffic accident.
  • Bodily injury resulting from business or commercial operation.
  • Medical expenses if a visitor gets injured on your property.
  • Bodily injury caused by pets or animals.
  • Property damage caused by pets or animals.
  • Injuries caused by you or a family member in your home.

    How Much Does It Cost?

    Policygenius found the average annual cost for personal liability insurance is about $8 to $10 per $100,000 in protection. Maxing out your coverage limits will cost you around $50 per year or about $4 a month. Depending on where you live, you might see much higher rates. Personal liability protection costs $15 annually for every $100,000 in coverage in denser cities.

    Personal liability insurance is considered one of the most efficient policy types for its relatively low cost compared to its fairly high levels of financial protection. Experts recommend purchasing a minimum of $500,000 of personal protection.

    How Much Personal Liability Coverage Do I Need?

    According to ValuePenguin, you should base the amount of liability coverage you need on the number of assets you own. For example, if your net worth is $500,000, you’re sued for $300,000, and your personal liability policy covers $100,000, your assets might be taken to make up the $200,000 difference. Those with higher net worths are more likely to be sued for damages because plaintiffs believe they are more likely to pay out. Purchase as much liability insurance as you can afford to help mitigate potential losses.

    Another thing to consider is the risk attached to your house. If you own high-risk items such as a trampoline, treehouse, or pool, you might want to purchase higher liability limits. Even if you don’t invite guests into your home, these items on your property are inherent risks.

    If you have $100,000 or more of assets, an umbrella policy or a personal excess liability plan could be right for you. These are supplemental protection plans with higher limits than conventional personal liability policies. If you have exhausted your homeowner’s insurance coverage limits, these policies will cover the difference. A stand-alone umbrella policy provides more general coverage, while a personal excess liability policy adds to an existing policy. Coverage limits depend on the policy you choose.

    What If I Am Injured in Someone’s Home?

    If you were injured at another person’s home, it might be in your best interest to speak with the owner. If you believe the owner is liable for lost income, medical expenses, or damaged property, they might have no issue filing a claim. The homeowner doesn’t pay a deductible, but they might face higher insurance premiums after the claim.

    Homeowners are often hesitant to get the insurance company involved and might choose not to file a claim. If you think they owe you damages, you could take legal action. Some courts make quick judgments when deciding if the homeowner is liable.

    In some instances, the court won’t make a judgment, and the case will go to trial. The homeowner pays for their legal defense fees out of pocket, or they might file a claim with their insurance provider to get their defense costs covered.

    Personal liability insurance means financial protection for you and your family. The coverage attached to your homeowner’s insurance plan provides coverage for claims and lawsuits against you. If someone were to sue for bodily injury or property damage, you would have peace of mind knowing you are covered. These plans are cheap and accessible. Contact your insurance provider today for more information on getting a personal liability insurance policy started.

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