What is Personal Liability Insurance?
Personal liability insurance provides coverage for the named insured and resident relatives for bodily injury or personal injury caused to others.
There are over 5 million dog bites in the US every year. Some of these bites require medical attention, some will cause longer-term trauma, and some may even result in lost wages if the injured person is unable to work due to their injuries.
While only one example of how personal liability can occur, the possibilities of exposure to a personal liability lawsuit are almost without limit; we can be sued for many reasons, some of which we may not immediately realize are risks.
–Or maybe you left your roller skates out and a visitor slipped on them, injuring himself or herself during the fall.
Look around the room you’re in now and you’ll see a number of potential risks, each a reason to carry liability insurance coverage.
Personal Liability Insurance for the Named Insured, and Resident Relatives
Personal Liability Insurance may also be called Family Liability Insurance on your policy, and the names given to the coverage are suggestive of who specifically is eligible for coverage. Personal (or family) liability insurance provides coverage for yourself and resident relatives for certain types of liability.
Note, this type of coverage does not apply to auto, boat, or motorcycle liability. Those are separate coverages on policies specific to those activities.
Personal Liability Insurance coverage amounts are usually based on the coverage selected in your homeowners or renters insurance policy but can be extended by an umbrella policy. Personal liability insurance does not extend to business liability and will specifically exclude business activity in the home (or elsewhere). You’ll need a business liability insurance policy for that.
Most commonly, personal liability Insurance applies to lawsuits arising from things like dog bites, falls, or other accidental injuries. If you think in terms of bodily injury, meaning that someone was hurt physically, you’ll have a good idea of what may be covered.
Bodily Injury vs. Personal Injury
Bodily injury needs to be differentiated from personal injury. The two terms sound interchangeable, but they are different in the context of liability protection. Personal injury is slander and/or libel in this sense. It’s when we are sued for the things we say or write as opposed to someone being hurt physically.
While personal liability for bodily injury is usually covered up to the limits of your homeowners or renters insurance policy, liability for personal injury is a bit less easy to understand in regard to coverage. In many cases, you’ll need to add an endorsement to your policy for this type of coverage, if it is available for your policy at all. In some cases, when no endorsement is available through your insurer, the only way to get coverage is through an umbrella policy.
In the event of a covered personal liability claim, your defense is usually outside of your coverage limits. That means if you have $300,000 in coverage and are sued and found liable for $300,000, your insurance policy will pay for the $300,000 judgment as well as your defense. If there were $30,000 in defense costs, that amount does not reduce the amount of coverage you have available toward your liability claim. Your insurance policy still covers you up to the full $300,000, not $270,000.
Some Types of Liability may not be Covered
You might find some fine print in your policy that will also exclude coverage for injury due to intentional acts and injury due to illegal activity, so be aware that your coverage is not universal and won’t make you the “Teflon Don”. We still own responsibility for the things we do intentionally.
Personal Liability Insurance Coverage Amounts
Typically, personal liability coverage limits included with your homeowners or renters insurance policy begin at a minimum of $100,000. A more common amount for a homeowners policy is $300,000. You can usually raise these limits but to get to a much higher coverage amount, for example, $1 million, you often need to get an umbrella policy in addition to your homeowners or renters insurance policy.
How Much Personal Liability Insurance Should You Have?
You’ll find recommendations on some very popular websites stating that a homeowner should have $300,000 in personal liability coverage. This figure, while a helpful starting point, is somewhat arbitrary. If you are sued and the judgment awarded is higher than $300,000, whoever wrote that advice won’t be paying your part of the judgment. Keep in mind that your policy will not pay more than your coverage amount. If the judgment is $500,000 and you have $300,000 in coverage, you are responsible for the other $200,000, regardless of whether or not you have it.
Buy as much coverage as you can afford, and choose a figure that makes you feel the most comfortable. If your insurance company provides the option to choose a higher coverage amount, the difference in cost between $300,000 and $500,000 in personal liability coverage is often only a few dollars per month.
Also published on Medium.