Say you have some friends over to watch the big game when one of them suddenly slips in the kitchen and falls, breaking their arm. Thankfully, your friend will be good as new in a few weeks. However, there's always the possibility that the injured party could sue, causing you to pay potentially thousands of dollars in legal or medical bills.
In situations like these, personal liability insurance can help protect you and your family. Along with a homeowners' or renters' insurance policy, having personal liability coverage may save you from significant legal and medical bills.
Here's everything you need to know about personal liability insurance and what that coverage entails.
What Is Personal Liability Insurance?
Personal liability insurance offers coverage that helps protect you and your family members from claims against you for personal injury or property damage to a third party. Your policy provides coverage up to a specific amount for legal or medical bills resulting from that injury or damage.
This coverage steps in if you're sued for damages and asked to pay medical bills, legal fees, and other expenses out of pocket. Depending on the claim, it could reach thousands of dollars, potentially hurting your family financially.
Personal liability coverage is often included as part of your homeowners' or renters' insurance. However, it might not always be included, and coverage can vary depending on the carrier. Your policy will cover legal defense fees and medical bills up to your policy limit.
What Does Personal Liability Insurance Cover?
A personal liability policy typically covers two primary areas: bodily injury and property damage, and any related expenses or fees if you're found at fault.
Your policy covers up to the limit — anything beyond that you may have to pay out of pocket. For example, say you have a $150,000 limit on your policy. You're determined to be at fault in a lawsuit, and you have to pay the injured party's legal fees, medical bills and lost wages, totaling $175,000. Your insurer will pay up to $150,000, as set by your policy, but you will be responsible for the remaining $25,000.
Some examples of bodily injury include:
- Your mail carrier slips on the ice in your driveway and can't work for a month.
- Your dog bites a neighbor.
- Your mother, who doesn't live with you, trips on a wobbly step and breaks her ankle.
- Your son's friend jumps on the broken trampoline in your backyard, hurting himself.
Coverage for property damage extends beyond your home as well. For example, if you or your family members cause damage at someone else's home, your policy may cover it. Some examples of property damage include:
- A dead tree in your backyard falls on your neighbor's roof during a storm.
- Your daughter is at a neighbor's house and accidentally hits a baseball through their window, breaking their TV.
- You leave a lit cigar unattended while at a friend's house. It starts a fire, damaging their deck.
If bodily injury or property damage occurs, and you're sued and found responsible, you may end up liable for costs and fees. These may include:
- Medical bills.
- Damages for pain and suffering.
- Lost wages.
- Legal expenses and death benefits.
Without insurance, you would need to pay for these expenses out of pocket.
What Isn't Covered by Personal Liability Insurance?
Your liability insurance doesn't mean you have full coverage for anything that may happen in and around your home or with your family. As with any insurance policy, there are limits, so it's important to not only know what personal liability insurance does cover but what it doesn't.
Here's some of what isn't covered by most personal liability policies:
- If you work remotely, business liability insurance can help cover you for business or professional activities that occur in your home.
- If you get into a car accident, your auto insurance can provide coverage for car damage.
- Intentional acts by you or your family members that result in bodily injury or property damage are not covered, such as if you get into a physical altercation with a friend in your home.
- Personal liability coverage won't include injuries or damage sustained in your home by family members who live there. If you are hurt at home, your health insurance policy can help cover the cost of your medical needs.
- Some policies may specify noncoverage for specific breeds of dogs.
Not all policies offer the same coverage. Review the details of your plan to determine what is and is not covered, and adjust as necessary.
Doesn't My Home or Renters' Insurance Cover Me?
It's essential to check your current policy to see the terms of your coverage. Your coverage will pay up to your limit, which is typically between $100,000 and $300,000 in damages. If you have a lot of assets and are worried about the potential of a lawsuit for damages, you may want to consider supplemental insurance. In this case, you can explore umbrella coverage, which extends your policy. These policies typically kick in after you've exhausted the limits of your home or renters' insurance.
For example, some supplemental policies have limits upward of $1 million in damages and can also provide coverage for your car and boat. In addition, umbrella policies may also extend what's covered by your liability insurance, offering greater flexibility.
Speak with your insurance agent to check your current policy and discuss increasing your limits or adding supplemental coverage to meet your needs.
What Should I Consider When Shopping for Coverage?
Comparing insurance policies of any kind means navigating plenty of different factors, and personal liability insurance is no exception. Here are a few things to think about while you explore your insurance needs.
A good rule of thumb is to look at your net worth and get a policy limit that matches it — or at least comes close. This lowers the risk you'll need to pay a substantial amount in damages if sued. If your coverage is for up to $100,000, yet your assets, including your home, are worth much more than that amount, you may want to increase your maximum to add extra protection.
If you have kids, a swimming pool, a dog or even a trampoline, you may also pay a higher premium, as these are considered riskier. For instance, using a pool or trampoline raises the risk of potential injury to guests. As a result, you may want to weigh getting additional coverage for more protection.
Review the costs of both a typical policy and a supplemental umbrella policy. As you compare, look at your assets as well as potential risk factors to help you determine if getting more coverage makes sense. Don't be afraid to shop around: You may find that the price for a policy offering double or triple your current coverage is not significantly higher than what you're paying now.
The Bottom Line
Personal liability coverage is all about protection for you and your family. With an understanding of your potential risk factors, net worth and needs, you have the tools to determine what kind of policy will work best for you.
If you have questions, consult your insurance agent. They'll be able to walk through your concerns and help you decide your next steps.