Personal liability coverage is the portion of your homeowners insurance policy that pays for legal, medical, and repair bills if someone is injured or their property is damaged and you’re found legally responsible. You generally want enough personal liability insurance to cover the value of everything you own.
What does personal liability insurance cover?
Personal liability insurance covers expenses like legal, medical, and repair bills if you’re found responsible for injuring someone or damaging their property. Coverage extends to incidents that occur both on and off your property.
Personal liability insurance may cover the following incidents:
Your dog bites a passerby or houseguest
A guest is injured using your pool or trampoline
Your firearm goes off while you’re cleaning it — injuring a neighbor or guest
A food delivery person slips and falls on your icy walkway
A dead tree in your yard falls onto your neighbor’s house
Your dog destroys your guest’s expensive fur coat
To use your personal liability coverage, you first need to file a claim with your insurance company. For your claim to be accepted, it needs to be proven that your negligence led to the injury or property damage. If negligence can’t be proven, then your insurance company will deny the claim.
When negligence CAN be proven
Say your dog attacks and bites someone walking by your property. That would be a clear case of negligence on your part for not securely leashing your dog. Your insurance would likely approve the claim.
When negligence CAN’T be proven
Say a food delivery person trips over their own feet walking to your front door and injures themself. That would not be a clear case of negligence on your part. Any liability claim would likely be denied by your insurance company.
What does personal liability insurance not cover?
Here are just a few incidents your personal liability insurance won’t cover:
Any incidents where negligence can’t be proven
Injury to you or a resident of your household
Injury or property damage that results from your business activities
Intentional acts of violence
Injury caused by ”dangerous” dog breeds
Do I need to go to court if I file a personal liability claim?
Not always — in many cases, personal liability claims will be resolved without the need to go to court.
Lawsuits tend to happen only if …
Your insurance company denies liability for an incident.
You ignore or decline the injured party’s request for your insurance information.
How much does personal liability insurance cost?
Personal liability insurance typically costs around $8 to $10 a year for every $100,000 in coverage. Most insurance companies offer the option of between $100,000 and $500,000 in coverage.
Unlike dwelling coverage, how much liability coverage you have might not necessarily raise your rates all that much. With Nationwide, for example, a policy with $500,000 in liability coverage only costs around $30 more per year than a policy with $100,000 in liability coverage.
How much personal liability insurance should you have?
Most experts recommend that you have $300,000 to $500,000 in personal liability coverage. In general, you should have enough personal liability insurance to cover the total value of your financial assets — retirement funds, cars, homes — if not more.
Keep in mind a plaintiff can go after all of your personal assets if you don’t have enough personal liability insurance in place, so it’s important that you’re not underinsured — especially since more coverage might not cost you more money.
Let’s take a look at an example.
Say your net worth is $500,000, you have $250,000 in personal liability coverage, and you’re being sued for $400,000 in damages.
Since your insurance company only covers $250,000, the plaintiff can come after your personal assets to cover the remaining $150,000 in damages.
Add more coverage for extra risks on your property
Swimming pools, trampolines, and even treehouses are all potential risks that could result in injury to your guests. If you have any of these on your property, you should strongly consider maxing out your personal liability coverage limits.
Since most insurance companies offer a maximum of $500,000 in personal liability coverage, you might want to purchase a separate personal umbrella policy to increase your coverage limits.
What is a personal umbrella policy?
A personal umbrella policy — aka umbrella insurance — is a type of liability coverage that you can purchase in additionto your home insurance. If the liability coverage in your homeowners insurance is maxed out during a claim, your personal umbrella policy kicks in to cover the remaining costs.
Personal umbrella policies are generally offered in increments of $1 million — with a maximum limit of $5 million or even $10 million with some companies.
Umbrella policies typically cost around $300 a year for the minimum amount of coverage. If you have over half a million dollars in combined assets, personal umbrella coverage may be well worth it.
Frequently asked questions
What is medical payments coverage?
Medical payments coverage is the part of your homeowners policy that covers guests’ injuries if they get hurt on your property — regardless of who's at fault. This coverage is designed to pay for more minor medical expenses, like first aid, X-rays, and ambulance rides.
Can I file a liability claim against someone else’s homeowners insurance?
It depends on where you live. In some states, the injured party can file claims with the liable party’s insurer. In other states, liability claims can only be filed by the individual named on the policy. Talk to an insurance expert or attorney to discuss your options.
What is personal liability insurance for renters?
Personal liability coverage is also included in most renters insurance policies. While tenants generally don’t need as much liability coverage as homeowners, this is still a good safety net for any renter with valuable assets.
Why do I need personal liability insurance?
Personal liability insurance is the only way to protect your financial livelihood if you're ever found legally responsible for someone's injury or property damage. If you own a home and other expensive assets, you'll want enough personal liability coverage to cover their total value.
If someone is injured and you’re found liable and you don’t have personal liability coverage, you’d be legally responsible to cover the settlement entirely out of your own pocket.