What Is Personal Liability Coverage?

Personal liability coverage is designed to bail you and your family out on many occasions. And the thing about it is that many people don’t think they need it until they actually have to use it. Then they’re always glad it’s a perk of their policy. Let’s take a deeper dive into everything you need to know about personal liability coverage.

Personal liability insurance mainly covers accidents that occur on a policyholder’s property and are considered to be the fault of a policyholder — whether it’s due to a broken stair or an attractive nuisance in the backyard like a pool or trampoline — dog bites on and off the property or if the policyholder caused damage to another person’s property.

All of those instances should be covered by your home insurance policy, and resulting lawsuits should also be covered up to your policy’s maximum home insurance personal liability limits. Many plans come standard with $100,000 worth of liability coverage, but you can always opt for more.

In the instance you have to file a liability home insurance claim, and it was deemed to be covered by your insurer, your policy would pay up to your maximum for each claim to cover any medical expenses, damages to other people’s property and lawsuits that result due to the incident.

Standard home insurance policies typically come with $100,000 in liability coverage. However, many policies offer up to $500,000 in protection. Many people can settle for a comfortable $100,000 in liability coverage and be just fine. However, there are many instances when it’s smart to increase your liability coverage past the $100,000 mark.

If you have a pool, you should opt for higher coverage due to the many tangible dangers that come with them. If somebody happens to drown in your pool and you’re found liable, a lawsuit and damages could easily total more than $1 million. If you only have $100,000 in coverage, the remaining $900,000 would come out of your own pocket, and you may be forced to file for bankruptcy.

If you have a dog, you may want to opt for at least $500,000 in coverage just in case they bite someone. Dog bites are among the most costly liability claims filed, nearly topping $50,000 per instance and regularly pushing past the $100,000 mark. Keep in mind that you must add your dog to your home insurance policy to get coverage, and some insurers restrict certain dog breeds.

If you need more than $500,000 in liability coverage and your current insurer doesn’t offer that, you can always opt for umbrella insurance, which increases your liability coverage to $1 million with the option to increase it incrementally by another $500,000 to $1 million.

Let’s take a look at an example. If you have $100,000 in liability protection and your dog bites a neighbor, resulting in $30,000 worth of medical bills and a lawsuit with $40,000 in court costs and settlement fees, your home insurance would cover the expenses because the $70,000 total falls under your policy’s maximum.

If, two weeks later, a friend comes over and breaks their leg while jumping on your trampoline, resulting in $20,000 in medical bills and $70,000 in court costs and settlement fees, your insurance would pick up the tab as well. Since the two incidents are separate and each falls below the $100,000 threshold, you should be covered fully under your home insurance personal liability limits.

However, if you only had $100,000 in liability coverage and either instance surpassed that amount with medical bills and legal fees, you’d be stuck paying the difference out of your own pocket. That’s why we always recommend getting more liability coverage than you think you may need.

The minimum limit of Coverage E on home insurance policies is typically $100,000 and the maximum most companies will cap you at is $500,000. However, you can get $1 million or more in personal liability coverage if you invest in umbrella insurance.

Umbrella insurance is a standalone policy that’s used in conjunction with your home insurance’s personal liability coverage to help pay for damages that go above your policy’s maximums. So if you had $500,000 in liability coverage with your home insurer and $1 million in coverage with your umbrella insurer, the home insurance’s portion would typically be utilized before your umbrella policy kicks in.