What is personal liability insurance?

Personal liability insurance protects you if you are sued for harming or damaging someone else's property. It can cover your legal bills and other expenditures for which you are held liable, up to the policy amount.

Here's an example of when you might require this coverage:

During a summer pool party, your deck becomes slick, and a guest trips and falls. She injures her elbow and sues you for medical bills as well as pain and suffering. If you are held accountable for your guest's injuries, your personal liability insurance will fund your legal defense and pay up to your policy limit.

Personal liability coverage, like coverage for the construction of your home, is a basic component of a homeowners insurance policy. Other forms of home insurance policies, such as renters and condo insurance, contain personal liability coverage as well. (To learn more about renters liability insurance, go here.)

Your homeowners policy's personal liability insurance typically covers everyone in your household, including children and pets.

Is personal liability insurance required for homeowners?

There is usually no regulation requiring you to have personal liability insurance in order to own a home. If you have a mortgage, you will almost probably need personal liability coverage.

Most mortgage lenders need hazard insurance, which is a component of a homeowners policy that protects your home's structure. When you purchase homes insurance for hazard coverage, you will almost certainly receive personal liability coverage as well.

If you own your home outright or are purchasing one without a mortgage, you may not need homeowners insurance. However, leaving without financial protection from litigation or the destruction of your home is a risk you should carefully consider.

What does personal liability insurance cover?

Personal liability insurance covers damage you cause to other people or their property, but not your own injuries or property damage. The following are some instances that your personal liability insurance would most likely cover.

Injuries that you cause

While jogging, you round a corner and collide with a pedestrian, knocking him off the pavement. He injures his ankle and is unable to work for several months. He files a lawsuit against you for medical expenditures and lost wages.

Injuries on your property

On your snowy front steps, a delivery person slips and falls. She initiates a lawsuit against you, accusing you of carelessness for failing to lay down salt that morning.

Injuries caused by your pet or child

Fluffy, your dog, gets a little too excited in the park and bites a child's hand, leaving a wound that requires stitches. The child's parents sue you in order to recoup their medical expenses. (Please keep in mind that certain insurers will not cover specific dog breeds or animals with a history of aggressiveness.) Check with your insurance provider to ensure that your dog is covered.)

Damage caused by someone in your household

Your son smashes a long fly ball through a window at his closest friend's house, destroying not only the glass but also an expensive vase inside. If you are proven liable, your liability insurance may cover the costs of the damage.

Damage to your property that impacts the homes of others

A tree in your yard falls onto the roof of your next-door neighbor. Because the tree was dying and you didn't have it professionally removed, you're held liable for the harm.

What does personal liability insurance not cover?

Below are some circumstances that are often not covered by personal liability insurance, as well as recommendations for additional policies that may provide coverage. Check your homeowners policy for a complete list of exclusions.

Car accidents

You run a red light and collide with an SUV. The second vehicle's three passengers are all hurt, and the SUV is totaled. Your liability car insurance would cover the medical and repair costs for the individuals in the other vehicle, not your homeowners personal liability coverage.

Business liability

You run a home-based business and are sued by a client for what she perceives to be improper advice. Despite the fact that the incident occurred in your house, personal liability insurance normally does not cover lawsuits related to business interests. Instead, you'll require commercial insurance.

Injuries to members of your family

Your living-with-you daughter trips and falls down the basement stairs. Personal liability insurance might cover her injuries if she were a guest in your home, but because she's a member of the household, she'll have to rely on her own health insurance for treatment.

Intentional harm

Your adolescent son and his buddies spray-paint derogatory slogans all over the outside of a nearby store. Because they purposefully caused the damage, it is deemed a crime rather than an accident or act of negligence. Your liability insurance will almost certainly not cover your son's defense.

How much personal liability coverage do you need?

Homeowners insurance policies often have liability limits ranging from $100,000 to $500,000. If that isn't enough, companies that cater to affluent customers, such as Chubb, sell sums in the millions.

The amount of personal liability insurance you purchase is determined by the value of your assets, the likelihood of being sued, and your risk tolerance.

Consider purchasing personal liability insurance that is at least equal to your net worth. If any of the following lawsuit risk factors apply to you, you may want to choose a higher amount:

• You enjoy activities that could endanger others, such as skiing, hunting, or surfing.
• You have a pool, trampoline, or other "attractive nuisance" in your home.
• You have a dog. (Confirm that your insurer will cover the breed.)
• You are a celebrity or a wealthy member of the community.
• You host a lot of parties in your house.

If your homeowners policy's liability limits are insufficient, you may want to consider adding umbrella insurance. This sort of policy adds liability coverage to your existing homeowners and auto policies, with limits starting at $1 million.

How much does personal liability insurance cost?

Personal liability insurance is most frequently purchased as part of a homeowners policy, which costs $1,765 per year on average, according to a InsuredCircle pricing analysis. That premium includes a $300,000 liability limit, but increasing coverage is relatively inexpensive. Increasing the liability limit to $500,000 increases your average annual cost by $8.