Personal Liability Insurance: What Is It and How Much Does It Cost?

Most homeowners insurance policies provide policyholders with personal liability coverage. The personal liability portion of your homeowners insurance protects you by offering personal injury and property damage coverage. In other words, if you hurt someone or damage their property, your homeowners insurance offers financial protection if you're found to be legally liable. Increasing your personal liability coverage limit is typically inexpensive, therefore, we recommend purchasing enough coverage to protect your assets. Otherwise, you may leave yourself exposed to potentially large financial losses.

What Is Personal Liability Insurance?

Personal liability insurance covers the costs of a lawsuit if you're sued for injuring someone or destroying someone's property. While personal liability coverage can be purchased as a stand-alone policy, it is included in most residential insurance policies, including homeowners, renters and condo. Filing a claim under your personal liability coverage, whether it's a stand-alone policy or not, is similar to filing any other type of insurance claim. We recommend contacting your insurance company as soon as you're aware that you may be responsible for the destruction of property or for someone's bodily injury.

The personal liability coverage in a standard homeowners insurance policy protects you against two things: bodily injury and property damage for which you or residents of your home are responsible. Some situations in which you might need personal liability coverage include the following.

Bodily Injury: Let's say your dog bites a mail carrier on your property, and the carrier has to get medical care and miss work. In this instance, the mail carrier could choose to sue you for related expenses, including medical bills, lost wages and emotional distress. Without personal liability insurance, you'd have to pay out of pocket for the expenses if you're found to be legally liable.

Property Damage: If a tree that is located on your property falls over during a thunderstorm and damages your neighbor's roof, you could be held responsible for the property damage. Your neighbor could then choose to pursue legal action against you in an effort to receive financial compensation for the damage to their roof. Once again, without personal liability insurance, you'd be solely responsible for paying for the damage.

While those situations took place inside your property, bodily injury and property damage protection is also granted to you and members of your household outside of your home. For instance, if your dog runs outside and bites someone down the street, your home insurance personal liability would still provide coverage. Similarly, if you're running at the park and knock someone over, causing them to break a bone, any medical bills would be covered under the liability portion of your home insurance if you're found to be responsible.

Keep in mind that your personal liability coverage would not apply if an accident occurs while you're in a car. In that scenario, you'll need a separate car insurance policy with bodily injury protection and property damage coverage.

Does Homeowners Insurance Cover Personal Injury?

Homeowners insurance covers personal injuries as long as your policy includes personal liability coverage, and most policies do. However, not every injury will be covered by your personal liability insurance. The only injuries that will be covered are those in which a person is injured as a result of negligence on your part. Therefore, intentional acts aren't covered by your personal liability insurance. Furthermore, your personal liability insurance only applies to others, meaning any of your own injuries will require health insurance.

How Much Personal Liability Coverage Should You Have?

The more financial assets you have, the more liability coverage you should purchase. Your liability coverage limit should be as high as you can afford to mitigate the risk of financial loss if someone were to sue you. For instance, if your net worth is $600,000 and you're being sued for $400,000 worth of damage, but you only have $100,000 worth of coverage, the plaintiff can come after your assets to make up for the remaining $300,000 worth of damage. And plaintiffs are more likely to go after you if you have a higher net worth, since you are more able to pay out a judgement.

CategoryAmount
Personal Liability Coverage$100,000
Personal Injury or Property Damage Claim Brought Against You($400,000)
Recoverable From Personal Assets$300,000

If you have assets of $100,000 or more, consider purchasing an umbrella policy or personal excess liability insurance. Both serve as a form of supplemental coverage with a higher limit. In other words, an umbrella policy and personal excess liability insurance kick in after exhausting your homeowners coverage limits. An umbrella policy provides broader coverage, while personal excess liability insurance adds coverage to the underlying policy. In the scenario above, an umbrella policy or personal excess liability insurance would kick in for the remaining $300,000, safeguarding your assets. Keep in mind that coverage limits will depend on your specific policy.

Home Insurance Personal Liability: How Much Does It Cost?

Purchasing a higher limit for personal liability coverage is relatively inexpensive. This is especially true when compared to the cost of other homeowners insurance modifications, like increasing your dwelling coverage. The table below outlines the cost of increasing your personal liability coverage limits on a sample home with a $200,000 policy with State Farm.

Personal Liability CoverageAnnual Homeowners Insurance RateCost of Increased Coverage
$100,000$4,339-
$300,000$4,354$15
$500,000$4,364$10
$1,000,000$4,374$10

Based on our sample, tripling your personal liability coverage only costs $15 more per year. Keep in mind that the exact amount will change depending on your home's location, among other factors. That said, you shouldn't expect a drastic increase in rates when increasing your personal liability coverage limits.

Even though umbrella policies provide much higher coverage limits, the cost for personal umbrella liability policies remains low. You can expect to pay anywhere from $150 to $300 per year for $1 million of coverage from a personal umbrella liability policy. Keep in mind that a personal umbrella policy provides supplemental coverage, meaning it goes into effect after exhausting your homeowners or auto insurance policy.

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