Personal Liability Coverage: Protection Against Lawsuits

Personal Liability Coverage

Property Insurance

No Deductible

Asset Protection

Also known as family liability insurance, personal liability insurance is an essential coverage that provides financial protection for you and your family in the event that you were found legally responsible for injuries or damages to others.

Personal liability insurance is a coverage that is built into most homeowners, condo, renters policies. This coverage is also included in most landlord policies as a layer of financial protection for property owners. 

In this article, we will go over these topics:

Broken window

What are covered in personal liability policy? 

If you or your household family members accidentally caused bodily injury or property damage to another person, the personal liability insurance on your policy will cover the following: 

  • Injury to the individual(s)
  • Property damage as a result of the accident
  • Lawsuits relating to the accident
  • Medical bills
  • Lost wages
  • Death benefits
  • Legal costs
  • Pain and suffering

Coverages for your pets

According to the Insurance Information Institute, there were nearly 18,000 dog bite claims in 2019 and the average payout for a dog bite claim was $44,760.* Dog bite claims remain as one of the top personal liability insurance claims year after year in the United States.

The financial protection afforded by your personal liability coverage also extends to injuries or damages caused by your pets including dog bites. 

Examples of personal liability coverage claims

Even though personal liability insurance is part of your home, renters, or condo policy, it covers incidents occurred outside of your home as well.

Below are some examples of personal liability claims:

Property damage

  • Your kids are playing in the backyard with friends and accidentally hit a baseball into a neighbor's house. The baseball damaged the neighbor's kitchen cabinets along with an expensive set of glassware. 
  • You left a scented candle burning in your apartment unit that resulted in a fire that damaged your unit and next door neighbor's unit. 
  • You accidentally left the stove on and a fire started in your kitchen that triggered the fire sprinklers in your condo building. The water from the fire sprinklers damaged your unit and three other neighboring units. 

Personal injury

  • Your guest tripped and fell while walking on your gravel patio that is cracked with uneven surfaces. The incident resulted in sustained injuries with $5,000 worth of medical bills. 
  • Your neighbor’s kid is visiting your home for a playdate. While playing on the trampoline in your backyard, one of the trampoline legs broke due to accumulated rust and injured the neighbor kid. Your neighbor files a lawsuit for the injuries.
  • You threw a big birthday party in your home and served alcohol to your guests. Later that night, you were notified that one of your guests had driven home while intoxicated and caused a car accident that resulted in serious injuries and damages.

Note that every insurance company has its own guidelines for claims. Always speak to your insurance agent for more detailed information specific to your insurance policy. 

Modern home

How much personal liability coverage do I need to make sure I am adequately covered?

The purpose of liability insurance is to protect your financial assets. It is always recommended to secure a personal liability coverage amount that matches your current net worth. 

A simple way to determine how much liability coverage you need is to total up the estimated value of your assets. 

Here is a basic example: 

Value of your home $750,000
Value of your two cars $50,000
Savings and/or CDs $50,000
Accumulated 401K/IRAs $900,000
Total: $1,750,000

Personal liability coverage limit

Most homeowners insurance policies include a basic amount of $100,000 for personal liability coverage. Depending on your insurance company, you may choose to increase the coverage up to $300,000, $500,000 or $1,000,000.

If you are a homeowner in the Greater Seattle area, your home value could very likely exceed the liability protection on your home insurance policy. 

According to home value tracking website Zillow, the median home value in Seattle is nearly $768,000, an increase of more than $250,000 since the end of 2014.** As home value continues to rise in the Puget Sound Area, the need for higher financial protection and liability coverages increases accordingly.

How do I obtain additional personal liability coverage?

Some accidents may carry significant financial cost impact beyond the liability coverage in your homeowners insurance. In these instances, it would be comforting to know that you are protected with an extra layer of financial protection coverage. 

A personal umbrella insurance policy offers such financial protection. The coverage of an umbrella insurance policy starts at $1,000,000 and can go up to $5,000,000, depending on your insurance company. 

Just like its name, umbrella insurance policy encapsulates all of your assets under its protection including your home, cars, recreational vehicles, savings, and retirement funds.

Umbrella policy even shields your immediate family living under the same household, including your spouse and children who are still financially dependent on you.

Cost of personal umbrella policy

An umbrella policy provides greater peace of mind and is also very affordable. The Insurance Information Institute estimates that a $1,000,000 umbrella policy costs between $150 and $300 per year***.

Keep in mind that in order to purchase an umbrella insurance policy, you must also meet certain coverage limit requirements on your standard insurance policies such as auto, recreational vehicle, and property.

Coverage exclusions

What are not covered in personal liability coverage?

Keep in mind that in order for your liability coverage to be activated, you must first be found liable for the cause of injuries or damages to a third party. 

When you carry liability insurance, not only does your insurance company have to launch an investigation to prove your negligence, but they also have the duty to defend you as its customer once negligence has been established. 

Nevertheless, there are certain exclusions under your personal liability insurance coverage we want to go over: 

  • Liability involving automobile accidents. If you are found liable in an automobile related accident, your auto liability insurance coverage will apply and take care of the injuries and damages to the other party. 
  • Intentionally causing bodily harm or property damage to another individual by you or family members.
  • Injuries or damages sustained by you or family members who live in the home. Liability insurance only applies to a third party, so it would not cover any injuries or damages to you or your household family members as result of your own negligence. 
  • Business activities relating to your profession. Liability insurance will not cover business-related liability claims against you.

*"Spotlight on: Dog bite liability" Retrieved 7-27-20.
**https://www.zillow.com/seattle-wa/home-values/ Retrieved 7-27-20
***”What is an Umbrella liability policy?” Retrieved 5-19-20.

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