What is Personal Liability Coverage?
Personal liability insurance is part of homeowners insurance and can cover property damage and bodily injury if you are found responsible.
Personal liability insurance protects you if you are found responsible for personal injury or damage to someone else's property. In the case of an accident, liability insurance can cover medical, legal and other expenses. If you have homeowners insurance, you likely already have coverage as part of your policy.
- What does personal liability insurance cover?
- Cost of personal liability insurance coverage
- Liability exclusions
Personal liability coverage
Personal liability coverage is a component of standard home insurance policies. Liability protection can help pay for your legal defense and the fees associated with accidents and lawsuits, medical bills and the cost to replace damaged property.
Your personal liability coverage can come in handy when:
- You are responsible for medical expenses associated with personal injury
- You incur legal fees related to an accident
- You or someone on your policy, such as kids or a spouse, damage somebody else's property
- You must compensate someone for pain and suffering or lost wages
Your policy travels with you and protects you no matter where the accident occurs. Unlike most car insurance policies, personal liability insurance covers you nationally and internationally, whether you are on or off your own property.
There are two types of damage personal liability covers: bodily injury and property damage.
If another person makes a claim against you for injuries they suffered, the personal liability coverage within your homeowners insurance policy can pay the costs of damages or legal fees. This includes injuries related to slips and falls on your property for which you are found negligent, and accidental bodily injury occurring off your property.
Liability claims accounted for about 2% of all home insurance claims in 2017, but lawsuits can be very costly if you're uninsured. For example, dog bite claims are among the most common bodily injury claims: in 2018, insurers paid out over $675 million in dog bite claims alone.
Personal liability insurance also covers you if you are found responsible for damage to other people's property. For example, if a water leak in your home damages another around it, you could be responsible for the costs.
Imagine a tree or other debris falls from your property and damages neighboring properties, or if a member of your household throws a baseball through your neighbor’s window. These are examples where accidental property damage can lead to costly repairs.
How much does personal liability insurance cost?
The average cost of homeowners insurance is between $1,100 and $1,300 a year for a typical home with $100,000 of liability coverage. Raising your liability coverage limit does not dramatically impact your rates, according to our data.
Going from $100,000 of liability protection to $500,000 only raised our sample home’s rates by $63 a year! That means you can expect to pay an extra $1.57 a year for every $10,000 of liability coverage you add to your homeowners insurance policy.
Rate increases after a liability claim
While liability coverage tends to be cheap to increase, having to file a liability claim can increase your homeowners insurance rates. We found that home insurance rates increase by 21% after you file a liability claim.
With an increase in homeowners insurance of $257 a year after a liability claim on average, it may be worth it to avoid filing a claim, however this is often not possible.
What personal liability insurance doesn’t cover
Personal liability coverage does not cover everything. Notably, it excludes:
- Injuries to people on your policy, like you or your family
- Injuries or damage arising from illegal activity
- Intentional harm
- Injuries and damage originating from a home business. But you can buy insurance for your home-based business, which covers injuries to employees
Personal liability coverage in homeowners insurance also doesn’t cover injuries or damage that happens while you are operating a vehicle. However, your auto insurance policy might protect you in the case of bodily injury or property damage due to car accidents.
Personal liability has a coverage limit
Your liability coverage will likely have a maximum payout, or coverage limit. That means any amount of money you are responsible once your coverage limit is reached won’t be covered by insurance. Most policies start with about $100,000 of coverage.
There are instances when the personal liability coverage limit is met, and the remainder of a liability payment is recoverable from your personal assets. For example, if your coverage limit is $300,000, and a $500,000 claim is brought against you, you could be forced to pay the remaining $200,000 from other assets.
If you don’t think you have enough liability coverage through homeowners insurance to protect your assets, we recommend an umbrella policy. Umbrella policies are like personal liability coverage, as they protect you and your family from similar accidents. Umbrella policies are purchased as an addition to already-existing personal liability coverage, and supplement your protection.
We analyzed 27,622 quotes across every ZIP code in Illinois from six companies: Allstate, American Family, Farmers, State Farm, Travelers and USAA. We chose a sample home with a value of $240,000. The following policy specifications remained constant in our analysis:
- $240,000 dwelling coverage
- $24,000 other structures coverage
- $120,000 personal property coverage
- $48,000 loss of use coverage
- $5,000 medical payments to others coverage
- $1,000 deductible
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