Insurance Basics: Liability Insurance

Terry Herr, CFP®, CLU

Personal liability insurance is about providing additional financial protection for you and your family. The personal liability coverage within your homeowners policy provides coverage to pay for claims of bodily injury and property damage sustained by others for which you or covered residents of your household are legally responsible.

For example, if someone falls down your stairs or your child accidentally throws a ball through a neighbor’s window, breaking an expensive vase, you may be held legally responsible for the damages caused.

Many homeowners insurance policies provide a minimum of $100,000 in personal liability coverage, meaning the insurance company can pay up to that amount in total to injured persons per occurrence. If you feel you need more protection, higher limits are available. You can also purchase an umbrella policy, which enables you to extend your liability coverage beyond the limits of your primary liability policy.

What Does Personal Liability Insurance Cover?

Personal liability insurance covers a variety of situations in which you may be legally responsible to pay for something that happened to someone else on property that you own or, in some situations, on property that you don’t own. Some examples of common personal liability claims are:

• Medical bills that result from a visitor’s injury at your home
• Legal expenses resulting from lawsuits that seek to recover damages that are potentially covered by the policy
• Bodily injury or property damage that results from your negligent acts or omissions
• Bodily injury or property damage caused by your pets
• Medical Payments

Another type of personal liability coverage typically included with your homeowners policy is for medical payments to others. Typically, a homeowners, renters, or condo policy provides for the payment of necessary medical expenses for persons who are accidentally injured on your property. This is regardless of whether you are legally responsible.

Typically, medical payments coverage limits start at $1,000 per person. Higher amounts of coverage may also be available depending on the type of coverage you choose.

What is Not Covered by Personal Liability Insurance?

Your homeowners or renters insurance will cover certain personal liability claims, but there are other claims that may not be covered. A few common examples include:

• Liability that results from a car accident. These claims should be covered by your car insurance.
• Bodily injury or property damage caused intentionally by you or a family member.
• Injuries or damages sustained by you or other covered residents in your home.
• Bodily injury or property damage arising out of any business conducted by you or arising out of your professional activities. Claims that arise while you are engaging in any business-related activities should be covered by a business insurance policy.

Other Liability Coverage Exclusions

A homeowners, renters, or condo policy does not cover all situations of bodily injury or property damage for which you or a covered member of your household may be legally responsible. Most policies contain exclusions and exceptions, so it’s important to understand the details of your specific coverage.

To better understand your personal liability coverage and other important insurance topics, review your policy. You want to be sure you are appropriately insured.  

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