What Is Personal Liability Insurance? | US News – U.S. News & World Report

While many people are familiar with standard homeowners and renters insurance policies, they may understand less about personal liability insurance. These owners and renters may be surprised to know that in many cases personal liability insurance is a component of their policies. Put simply, personal liability coverage protects you and your assets if you’re held responsible for another person’s injuries or damage to their personal property.

What Is Personal Liability Insurance Coverage?

Personal liability insurance is a part of most homeowners and renters insurance policies and may be referred to as “coverage E.” It is designed to provide coverage in the event that you are found liable for property damage or bodily injury to others. Whether a houseguest gets hurt due to your negligence, you accidentally cause damage to someone else’s home or personal property, or someone else listed on your policy unintentionally injures another person, personal liability helps to cover legal fees, medical expenses, and repair costs.

While personal liability operates as a standard part of homeowners insurance and renters insurance policies, it does have its limits. Most policies cap coverage at $500,000 or less. Those seeking additional coverage can take out an umbrella insurance policy. Umbrella policies are designed to kick in once you’ve tapped out your personal liability insurance. Coverage often starts at $1 million and can go to $10 million or more.

What Does Personal Liability Insurance Cover?

It’s important that homeowners and renters possess a clear sense of what their personal liability insurance covers up to their policy limits. Specific examples of where personal liability insurance kicks in include:

Legal fees and court costs regardless of whether or not you are found responsible
Medical bills that are a result of bodily injury to others that occurs at your home. This can include injuries caused by your negligence, such as if you fail to repair a known trip hazard on a staircase. 
Lost wages until the injured party is able to return to work.
Pain and suffering lawsuits due to injury in your home can drain bank accounts, but personal liability insurance can help cover the cost of a settlement if you’re found legally responsible.
Death benefits if someone suffers a fatal injury on your property, such as funeral or burial costs.

What Doesn’t Personal Liability Insurance Cover?

Before taking out homeowners or renters insurance policies, make sure you carefully read the fine print to determine what the insurer excludes from coverage. While this can vary from policy to policy, standard exclusions include the following:

At-fault auto accidents, which usually are covered by your car insurance.
Injuries to yourself or to household members, which typically are covered by health insurance.
Damage or injury you cause intentionally
Injury or damage claims related to your job or conducting business out of your home.

How Much Personal Liability Insurance Do I Need?

The whole point of personal liability insurance is to protect your net worth in the event of a lawsuit, so you’ll want a coverage amount that reflects the value of your assets. Assets can include real estate, vehicles, bank accounts, investments, and valuable possessions, such as jewelry, art, furniture, and electronics. Experts recommend conducting an inventory of your property and assets to make an informed decision about how much personal liability coverage you need.

Let’s say you have $100,000 in personal liability coverage but your assets total $250,000. If someone sues you due to injuries or damages sustained on your property or theirs for $225,000 and the judge rules in their favor, you will need to pay the additional $125,000 from your own pocket.

Most homeowners insurance policies include a minimum of $100,000 in personal liability coverage, but you can often choose a higher amount, such as $300,000 or $500,000. Coverage is typically capped at $500,000. If you want more protection, you may want to consider adding umbrella insurance.

How Much Does Personal Liability Insurance Cost?

Personal liability insurance functions as part of homeowners policies and the cost is bundled together. In a report compiled by the National Association of Insurance Commissioners based on 2018 data, homeowners insurance averaged $1,249 per year, while renters insurance averaged $179 per year.

Many factors influence how much a renters or homeowners policy costs, including location, deductible amount, coverage levels, and more. Your credit score can also influence cost, as can bundling your homeowners insurance or renters insurance with other policies, such as auto insurance.

Do Renters Need Personal Liability Insurance?

Personal liability insurance for renters operates similarly to that for homeowners in terms of what it does and does not cover. If someone is hurt while visiting your residence or you cause unintentional damage to their property, your personal liability coverage will protect your assets. In addition, personal liability insurance for renters can also help cover legal costs associated with lawsuits that stem from these kinds of calamities. Coverage amounts typically start at $100,000, but you may be able to increase or decrease this amount, depending on your insurer.

Does Personal Liability Insurance Cover Dog Bites?

It depends on your policy. In many cases, your policy’s personal liability provision will provide coverage up to policy limits. However, some insurers will not issue a home, condo, or renters insurance policy if you own a breed of dog that can be considered high-risk, such as a pit bull or Doberman pinscher, or if your pet has a history of biting people.

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