What is personal liability insurance?
Typically part of your homeowner’s insurance policy
Personal liability insurance can help protect you financially if you are held responsible for an accident or property damage. It is often included as part of a homeowner’s insurance policy. You will usually find it in the section of a policy called “Coverage E,” which may also include a form of medical payments insurance.
However, you can also purchase personal liability insurance by itself, usually as an “umbrella” policy designed to help protect you against the costs of being sued for an accident. Or you may be able to have personal liability insurance added to one of your current insurance policies.
What does personal liability insurance cover?
Imagine you waxed your kitchen floor, and a neighbor slipped and fell on it while visiting and was injured. Because your neighbor got hurt on your property, you could be held responsible for the accident.
With personal liability insurance, if the neighbor who fell needs medical attention, you can file a claim to help cover the medical costs. If your neighbor decides to sue you for damages, your personal liability insurance can be used toward your legal defense fees, up to the limit of your coverage.
But that’s is not all personal liability covers. Let’s say you go to your neighbor’s house and accidentally knock over their outdoor grill, starting a fire that burns down their house. In that case, your personal liability insurance will pay for the damages you caused up to your coverage limit. You may have to pay a deductible first, though.
Personal liability insurance can also cover accidents caused by your children and pets. If your child leaves a can of paint in a neighbor’s driveway, and this negligence causes the neighbor to trip over the can and spill it all over their driveway, personal liability insurance can help cover the cost of any property damage or medical bills that result. The same can hold true if your dog bites a neighbor or tears up their flowerbeds.
If you choose to purchase an umbrella personal liability insurance policy that is separate from your home insurance, you may also be covered for non-physical damage caused by something you said or wrote, which would be considered slander or libel.
What doesn’t personal liability insurance cover?
It is very important to note that personal liability insurance usually does not cover accidents or property damage related to your job or business. So, if you’re a professional roofer, and one of your clients feels that they suffered injury or property damage because of the way you performed your services, you can’t count on personal liability insurance. You will likely need professional malpractice insurance to cover any damages or legal fees.
Similarly, any injuries you, your workers, or your clients suffer on your property or during work hours typically must be covered by business insurance. This usually holds true even if you work or run your business from home, though personal liability insurance may be of some help in these cases.
Remember that we’re talking about accidents. Personal liability insurance usually will not cover any property damage or personal injury you or your family members commit intentionally. And we’re also talking about other people and their property. If your own family members are injured or cause property damage, other parts of a homeowner’s or medical insurance policy would come into play.
Finally, any liability from accidents involving your car typically will likely need to be covered by a separate auto liability insurance policy.
Is personal liability insurance worth it?
Personal liability insurance is one of the more affordable forms of insurance, so financial experts often recommend it as extra protection.
Ideally, you should consider having enough personal liability insurance to cover your entire net financial worth. Why? Because, if you were sued for an accident, potentially everything you have, including a portion of your salary, could be taken from you to cover the damages. But if cost is an issue, keep in mind that, as with many kinds of insurance, having some coverage is better than having none at all.
According to the Insurance Information Institute, most home insurance policies include at least $100,000 of personal liability insurance coverage. If that is not enough to cover you financially, a large umbrella policy could cost $300 per year or less.
If thinking about bad things that can happen where outdoor barbecues or your rambunctious pet dog are involved makes you nervous, it might be a good idea to review your home insurance policy to see if you have personal liability coverage. If you don’t have personal liability protection or you think it might not be enough, adding additional coverage can be an option. And it might cost less than you think.