What is personal liability insurance?

Your homeowners insurance policy includes personal liability coverage, which protects you against bodily injury and property damage claims if you're held liable.

Pat Howard 1600

Pat Howard

Published January 24, 2019

Before closing on a mortgage, your lender will require that you get home insurance and keep your home insured throughout the life of the loan. With home insurance, you have protection for some of your most important assets: your home, your stuff, and your personal legal responsibility if you’re ever held liable for someone’s bodily injuries or property damage.

Also known as liability coverage or liability insurance or Coverage E, this section of your policy is protection against occurrences where either you, family members who live with you, or property that you own causes accidental bodily injury to another person or damage to their property.

Liability losses are often the most expensive home insurance claims, sometimes amounting to hundreds of thousands or millions of dollars. A single liability “occurrence” could mean that you’re liable for medical expenses, pain and suffering, legal costs, and a multitude of other damages.

If you own a home, a few cars, and a boat, and don’t feel your standard liability coverages are enough, you may want to look into a personal umbrella policy to increase your liability limits beyond your home or auto policy’s standard coverage.

How does personal liability insurance work?

Like auto insurance, your home insurance policy is broken up into two sections: your first-party coverages, which protect your dwelling, other structures, your things, and your additional living expenses; and your third-party coverages, which provide medical payments for injured guests and covers your liability if you’re sued, but only up to your coverage limit. With home liability coverage, you’re protected if you’re held liable for injury or damage.

And it covers more than just injury or damage on your property. Home insurance also covers your liability for accidents or negligence away from the home as well. So if you ever accidentally injure a stranger playing a game of racquetball at the local gym, and the injured stranger decides to sue, your home liability coverage would have your back if you’re found liable.

Your liability coverage limit is the maximum amount your insurer will reimburse you for a covered occurrence, which is the event that caused the bodily injury or property damage. Often times, a single occurrence can have multiple claimants.

Most insurers offer minimum limits of $100,000 and allow you to scale up your coverage to as much as $500,000. Most insurers will set your default liability amount at about $200,000 to $300,000. But if you have a pool, one or several animals, or you have frequent visitors to your property, you may want to consider a higher coverage limit.

Higher limits and broader liability coverages – like coverage against libel and slander accusations – are available through personal umbrella policies, which we’ll go over a little later.

Do you have to pay a deductible?

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.

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## What does personal liability insurance cover?

Your personal liability coverage covers you in several ways: it protects you against certain occurrences that were accidental or negligent in nature and provides you with legal defense if you’re sued because of a covered occurrence.

What occurrences are covered?

Your liability coverage covers a number of occurrences, and we listed some of them for you below.

  • Dog bites or dog property destruction (but certain breeds may be excluded)
  • A diseased tree falls on your neighbors house
  • Bodily injury to employees of your residence
  • Bodily injury or damage caused by employees of your residence
  • A guest is injured 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

What occurrences aren’t covered?

Your home insurance policy will include a list of occurrences that are excluded from your liability coverage, meaning the injured party will either have to 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 (but you can get business liability coverage through home business insurance)
  • Damage to an automobile
  • Injury to the insured or a family member of the insured
  • Intentional acts of the insured
  • Certain breeds of dogs if they cause injury or property damage

What legal expenses are covered?

If your insurance company determines that you’re not responsible or liable for the incident, the claimant may still file a lawsuit. In that case, your insurance company will still provide you with adequate legal defense if you’re within your coverage limit.

If you’re found liable, your insurance company may provide coverage for the following expenses:

  • 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
  • Your legal defense costs

How do personal liability insurance claims work?

Liability claims are complicated in part because people generally aren’t sure who’s supposed to file the claim: the injured party or the homeowner? That often depends on the state. 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 named insured.

If you were injured at someone’s home, for instance, and you think the homeowners 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; the worst that can happen is 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 can force their hand by filing a lawsuit; the court may make a quick judgement and deem the homeowner liable or not liable.

If the court isn’t able to make a quick judgement and the claim needs to be taken to trial, the homeowner would either need to 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. For one, liability cases can involve multiple people filing claims, which means there’s multiple people who want to get their own separate settlement from you. It can also be hard to determine when exactly the claim occurrence started and when it stopped.

Say, for instance, that you accidentally hit a golf ball through your neighbors window and then later the house got robbed. In that case, your homeowners insurance may be responsible for covering not just the window damage, but the robbery and any future liabilities which resulted from the window damage.

Other types of personal liability insurance

Your home insurance policy comes with two main liability components: your personal liability coverage and your medical payments to others coverage, often called Coverage F.

To supplement your standard liability coverage, some insurers also offer personal umbrella policy and business owners policies.

Medical payments to others coverage

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.

Personal umbrella policy

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.

As we mentioned earlier, 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 liability coverage – often in increments of a $1,000,000. But policies typically cost around a few hundred dollars a year, so if you have multiple liabilities, 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.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.