More on Home Insurance
More on Home Insurance
Personal liability coverage protects you from claims related to bodily injury or property damage for which you’re held legally responsible.
Fabio Faschi - PLCS, SBCS, CLCS
Updated November 27, 2019|7 min read
Table of Contents
Personal liability insurance is perhaps the most integral component of your homeowners or renters insurance policy, protecting you from expensive litigation or medical bills in the event you’re held liable for bodily injury or damage to someone's personal property.
Liability losses are often the most expensive home insurance claims, sometimes amounting to hundreds of thousands or millions of dollars. A single lawsuit could find that you’re legally responsible for paying the medical expenses, pain and suffering costs, legal costs, and a multitude of other reward monies to the injured party.
Keep in mind that when a judgment is made at the conclusion of a lawsuit, your entire net worth (and a portion of your future earnings) could be fair game — so you’ll need enough liability protection to cover your total combined assets.
If you own a home, a few cars, and a boat, and your policy limits aren’t high enough to cover everything, you may want to look into a personal umbrella policy to increase your liability limits beyond your home or auto policy’s liability limits.
Personal liability insurance is a section of your homeowners policy that protects you from expenses arising from lawsuits and legal judgments
It typically costs around $10 annually for each $100,000 in coverage
If you need increased liability protection, consider getting a personal umbrella policy
The first thing to understand about personal liability coverage is it covers your general liability — not simply liability attached to the insured property.
With personal liability coverage, you’re protected from liability occurrences away from the home as well. For example, if you’re found liable for injuries sustained by a stranger during a pickup game at the local gym, your personal liability coverage would pay for the medical bills and other damages included in the judgment as a result of the accident.
Your liability coverage limit is the maximum amount your insurer will reimburse you for a covered occurrence. In some cases, a single occurrence could have multiple claimants.
Most insurers offer liability limits as low as $100,000. You can then add coverage in increments of $100,000 up to $500,000. If you have attractive nuisances on your property, such as a pool, a dog, or a trampoline, you may want to consider even higher limits via an umbrella policy.
An umbrella insurance policy also provides broader liability coverage — covering expenses related to libel, wrongful eviction, false arrest and personal injury.
Personal liability coverage covers your current and future assets if you’re held legally responsible for damages including bodily injury or property damage. It pays for everything from lawyers’ fees to medical bills to lawsuit judgements that stem from an accident or negligence. It also covers insured family members and members of your household for their actions on and off the premises.
Your liability coverage covers a number of occurrences, including:
Dog bites or property destruction caused by your dog (but certain breeds may be excluded)
A diseased tree falls on your neighbor’s house
Bodily injury to employees of your residence
Bodily injury or damage caused by employees of your residence
Guest injury on your property by accident or negligence (unless the injury was a result of negligence of supervision)
Accidental damage to someone else’s property caused by you or a family member
Drunk guests inflicting harm on themselves or others
Your insurance company will generally provide coverage for the following expenses if you’re found liable for an accident.
Claimant’s medical expenses
Claimant’s property damage expenses
Claimant’s pain and suffering expenses
Claimant’s lost wages
Life insurance death benefits for the claimant’s family
Legal defense costs
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Your homeowners insurance policy will also include a list of occurrences that are excluded from your personal liability coverage, meaning the injured party will have to either pay for their expenses out of pocket or submit a claim through their own insurance company.
Injury or property damage caused by someone who isn’t a family member of the insured (unless they’re named on your policy)
A healthy tree that falls onto your neighbor's house
Perils covered by someone else’s policy
Injury or property damage that results from the insured’s business activities (you’ll need home business insurance for business-related liability claims)
Damage to an automobile
Injury to the insured or a family member of the insured
Intentional acts of the insured
Certain breeds of dogs that are considered high risk
Personal liability coverage typically costs around $8 to $10 a year for every $100,000 in coverage, said Fabio Faschi, property and casualty lead at Policygenius. If you max out your liability coverage at $500,000, it’ll only cost you around $50 a year, or a little over $4 a month.
Faschi noted that coverage may be a little more expensive depending on where you live. Liability protection in metro areas, for example, costs around $15 a year for every $100,000 in coverage.
I almost always recommend at least $500,000 (in coverage) as it represents great value in protection compared to what it costs.
Your personal liability insurance coverage needs really depend on two things:
How much liability-related risk is associated with your property
What your total assets amount to
If you’re legally responsible for an injury and sued, the injured party can go after all of your assets in a lawsuit, not simply assets related to the insured property. If you own two homes with a combined value of $400,000, that’s $400,000 in property assets alone that you should protect with liability coverage.
You should also consider the liability risk attached to your home. If you have a pool, a trampoline, or a treehouse, those are all considered attractive nuisances that will increase your homeowners insurance premiums. More importantly, they’re an inherent liability risk for guests (especially children) on your property, whether they were invited or uninvited.
According to Faschi, it’s wise to max out your liability coverage limits.
“Many homeowners may not be aware of this, but despite its importance in terms of financial protection, your personal liability is one of the cheapest coverages on your policy,” he said. “For this reason, I almost always recommend at least $500,000 (in coverage) as it represents great value in protection compared to what it costs.”
Liability claims are complicated in part because it’s unclear who’s supposed to file the claim: the injured party or the homeowner?
It really depends on where the incident occurred. In certain states, the claimant can file claims against the liable party’s insurer. In other states, liability claims can only be filed by the individual named on the policy.
If you were injured at someone’s home, for instance, and you think the homeowner is liable for your medical expenses and lost income, then talk to the homeowner. They may very well have no problem filing a claim and helping you out. Afterall, the homeowner doesn’t have to pay a deductible; however, their insurance rates may go up.
But if the homeowner is resistant toward getting insurance involved and you feel you’re rightfully owed damages, you have the option of filing a lawsuit. The court may make a quick judgment and deem the homeowner liable or not liable.
If the court isn’t able to make a quick judgment and the claim needs to be taken to trial, the homeowner would need to either pay for defense costs out of pocket or file a claim with their insurer to provide defense costs for them.
Liability claims can also be expensive. Liability cases can involve multiple people filing claims, which means there are multiple people who want to get their own separate settlement from you. It can also be hard to determine when exactly the claim occurrence began and when it stopped.
Say, for instance, that you break a neighbor’s window and a burglar enters through the opening, robbing the place clean. In that case, your homeowners insurance may be responsible for covering not just the window damage but also the robbery itself and any future liabilities which resulted from the window damage.
Your liability coverage doesn’t require that you pay a deductible. However, if you’ve exhausted your coverage limit on any one occurrence, your insurer will require that you pay for the remaining legal expenses out of pocket.
Your home insurance policy comes with two main liability components: your personal liability coverage and your medical payments to others coverage.
To supplement your standard liability coverage, some insurers also offer personal umbrella insurance and business owners policies.
Medical payments to others coverage functions as a payment to guests in the event that they’re accidentally injured on your property — and in some cases off of your property. Medical payments are available to guests as long as certain conditions are met, such as:
If the injured person has your permission to use coverage
If the injury is caused by the insured
If the injury is caused by an employee of the residence
If the injury is caused by an animal of the insured
You typically have anywhere from $1,000 to $5,000 in medical payments coverage.
Liability coverage accounted for just one claim per 100 houses from 2012 to 2016, according to the Insurance Information Institute. But liability claims are typically more expensive than other kinds of claims, averaging $17,000 per claim from 2012 to 2016, compared to $10,440 per claim for property damage claims.
Claims can involve multiple parties, and occurrences can drag on and add up. That’s where personal umbrella coverage comes in.
Personal umbrella coverage provides you with increased personal liability coverage—often in increments of $1,000,000. Policies typically cost around a few hundred dollars a year, so if you have over half a million dollars in combined assets, personal umbrella coverage may well be worth it.
Umbrella coverage also broadens your liability protection to extend to nonphysical injury or damages. That means if you’re sued for libel or slander, your umbrella policy may be able to help, unless the libel or slander was related to a business that you own.
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