Personal liability insurance: Coverage when you’re held responsible

In a world where accidents happen and lawsuits loom, personal liability insurance kicks in to cover your financial responsibility to others — regardless of whether you are at fault.

Personal liability can arise from various situations, such as an accident in your home or a mishap involving your pet. Imagine a scenario where a guest slips on a wet floor in your apartment or your dog bites a stranger during a walk. In such cases, medical expenses and legal bills can escalate quickly. This is where personal liability insurance, a key component of your homeowners or renters insurance policy, steps in to cover your financial obligation from the accident.  

Let’s explore what personal liability insurance offers so those “oops” moments don’t become big financial headaches.

Personal liability insurance protects you if you or those in your household have legal liability for someone else’s injury or property damage inside or outside your home. 

Specifically, personal liability insurance covers:

• Bodily Injury: If a visitor is injured at your home or apartment, for example, by falling on a wet floor, your insurance can cover their doctor bills and surgery. 
  

• Property Damage: If others sustain property damage from you or your household relatives, personal liability coverage can cover the costs of fixing their property. If your kiddo hits a baseball through your neighbor’s expensive stained-glass window, this may kick in. 
  

• Legal Expenses: If you’re sued by a personal injury attorney arising from bodily injury or property damage to others, this coverage might pay for hiring a lawyer to defend you in court and cover any court costs and settlements resulting from the accident.

• Dog bites: Some insurance companies offer this, and some do not. If they do, they sometimes limit the coverage to certain breeds. You’ll want to double check this if you have any four-legged friends at home. 

You can get personal liability coverage as part of your homeowners or renters insurance policy. Insurance companies typically offer coverage limits of $100,000, $300,000, or $500,000 of personal liability. 

People generally purchase a limit that matches or exceeds their net worth to shield their financial assets from being destroyed by someone’s accident or an erroneous lawsuit.  

If you feel you need more coverage than what home insurance provides, you can buy an umbrella liability insurance policy. You might purchase a $1,000,000 umbrella limit that sits above your liability limits in your homeowners, renters, and automobile insurance policies. Then if a covered liability claim hits the maximum amount of coverage you have in your home and auto insurance policies, the umbrella will begin paying up to a $1,000,000 limit. 

A qualified insurance professional can help you determine the right level of coverage for you. Reviews can give you insight into what it’s like to work with different insurance agents or brokers, like this one regarding Clements Worldwide:

The personal liability coverage between homeowners and renters policies is very similar, but there are nuances to consider when comparing the risks and responsibilities of owning versus renting. 

First, homeowners will typically have higher coverage limits because they generally have more assets at risk — such as their house! This can make homeowners a bigger target for lawsuits. Plus, renters typically only need to worry about liability related to the contents within their rented dwelling, not outside premises or structures like garages. 

For these reasons, renters’ policies typically offer $100,000 and $300,000 limits and at a lesser cost. Some insurance companies might have $500,000 options, but it’s not as standard an offering as with homeowners policies. And renter’s insurance is not as apt to offer coverage for  dog bites. 

Regardless of policy, personal liability coverage is often considered the most affordable part of your homeowners or renters policy. So it doesn’t cost much more to buy the maximum limits offered.

If you have assets to protect, some level of protection for personal liability may well be worth it. Buying an umbrella policy might give you further peace of mind if you have a high net worth or valuable assets. 

Another consideration is to partner with an insurance company that will guide you through the process and take the stress out of lawsuits and accidents. As you shop your insurance options, Trustpilot reviews that discuss claims handling can give you a good idea of the type of customer service you might expect from different insurers. 

Personal liability coverage is meant to cover your financial obligation to others in an accident. Have you thought about financial protection in case of your injuries (homeowners and renters insurance), inability to work (disability insurance), or death (life insurance)?  

Check out our guide for more: 5 types of insurance to keep you and your assets safe