What is Personal Liability Insurance?

Personal liability coverage is that portion of your homeowners policy that provides coverage against a lawsuit if you are sued for injuring someone or destroying their property. Family liability is included in almost all home insurance policies, whether it’s homeowners, renters, and condo insurance. It’s a good idea to check with your insurance company to confirm that you have personal liability protection.

What does personal liability insurance cover?

Homeowners insurance liability coverage will be slightly different from one policy to the next, depending on the insurer and the homeowner’s needs. But, despite the differences, your policy will typically offer two types of financial protection against a personal liability claim: bodily injury and property damage.

Bodily injury will cover medical bills from injuries sustained by visitors to your home. Your homeowners insurance also offers lawsuit coverage and could provide for lost wages if the injured person cannot return to work for some time.

For example, your neighbor comes to your front door with the recipe she had promised you. As she hands it to you, your dog sees it as a threatening move and bites her on the arm. She could decide to sue you for any expenses connected to her injury, including medical bills, lost wages, and even emotional distress. Without homeowners liability coverage, you would be required to pay these expenses out of your pocket if you are found to be legally liable.

Property damage refers to the damage to someone else’s property for which you are responsible. The most common example would be a tree from your property falling on your neighbor’s property and damaging their roof or destroying their air conditioning unit.

Your neighbor could pursue legal action against you to collect financial compensation for the damage. As with bodily injury, if you don’t have personal liability insurance, you would have the responsibility of paying for the damage.

Both bodily injury and property damage also protect you and your family away from your home. If your dog gets out and bites someone in the next block, you will still have liability protection. And, if you’re riding your bike downtown and knock someone over, your homeowners insurance will provide lawsuit coverage if the person is injured seriously.

Are there homeowners liability coverage exclusions?

There are a few things against which personal liability coverage does not protect. And every policy has its specific list of exclusions, so it’s important to read and understand your policy, so you know which exclusions pertain to you.

The personal liability section of every home insurance policy will not allow household members to claim the coverage. For instance, if a resident of the home slips and falls on their icy sidewalk, the household exclusion would prevent them from making a medical claim. Instead, they would need to make that claim with their health insurance provider.

Any vehicles of your home are also not covered under the personal liability portion of your homeowners insurance. If you park your car in the driveway and your son throws a fastball through the side window, you will have to file a claim under your auto insurance comprehensive coverage.

If you run a business from your home, your personal liability insurance will likely not cover a claim for an injury or property damage that is either related to or results from the business. Your homeowners insurance might cover incidental business activities, but talk to your insurer since each company could define “incidental” differently.

And, of course, if someone is found to have injured themselves or damaged their belongings on purpose for financial gain, their claim will be rejected.

Why is liability protection important?

Lawsuits and lawyers are expensive, and if you are involved in a lawsuit, it could cost you now and in the future. Even if you have just rented your first apartment and think you have nothing to lose, your future assets, including your earnings, are at risk if you are found liable for a personal injury or property damage.

The potential for lawsuits is increasing every year. According to the National Safety Council (NSC), in 2018, 37,600,000 people suffered medically consulted injuries at home or in the community. There were an estimated 125,300 deaths.

Based on actual insurance payouts, according to the Insurance Information Institute, about one in 20 insured homes has a claim each year, and approximately one in 900 homeowners policies has a liability claim.

The risks are real, and personal liability coverage can protect your assets now and in the future. Anyone living on their own and having responsibility for their actions should seriously consider personal liability insurance protection.

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