What is Personal Liability Insurance Coverage

There once was a time when it was only the “rich and famous” who worried about being sued. But today, if programs like The People’s Court or Judge Judy are any indication, practically anyone can be sued for practically anything.

So, how do you protect yourself, your family, and your assets against lawsuits for situations for which you may (or may not, in some cases) be at fault? Personal liability insurance coverage is an important option to consider.

Most consumers are familiar with the “property” side of insurance; you receive a payment if your car is stolen or you crash into a tree; you receive money to repair your home after a fire or to replace your television after a break-in.  However, the “casualty” or “personal liability” side of the insurance equation is one that can often go unnoticed, at least until some unfortunate event occurs.

Personal liability insurance coverage is a type of coverage that is designed to protect you when you are sued for injury to another person or for damage to another person’s property. Many states require proof of personal liability insurance coverage before they will allow drivers to register their vehicles since driving a car carries lots of risks from the minor, such as clipping a neighbor’s mailbox to the severe such as falling asleep at wheel and causing a head on collision with multiple injuries. However, even non-drivers can also have a need for personal liability insurance protection as well. If your dog bites someone or your child hits a baseball through a neighbor’s window for example, personal liability insurance coverage can offer much needed protection.

According to Liability Insurance personal liability insurance covers damage to another person’s property, hospital and medical costs for their injuries, rehabilitative care, loss of income, and awards for pain and suffering in some cases. Additionally, even in situations where it is proved that you are not at fault for another person’s property damage or injuries, there can still be investigation costs, court costs, and defense costs that are incurred; personal liability insurance coverage can help with these costs as well.

Generally, personal liability insurance coverage is included as part of a standard homeowner’s, renter’s or automobile insurance policy package. State mandatory coverage limits for automobile insurance can vary but generally tend to be fairly low.  Most insurers do provide the option to increase personal liability coverage over the standard limits for an additional premium.  With rising costs and a poor economy it might be tempting to get by the bare minimum in terms of personal liability coverage in order to reduce your overall insurance costs; however, this isn’t always the best approach. 

The Wall Street Journal’s Net Worth Calculator can help in determining how much coverage you may need. You may also need to consider the your level of risk; a household with three teenagers of driving age might will probably need to carry higher personal liability limits and a 40 year old single driver; a homeowner with a swimming pool or a trampoline may want to consider higher limits than someone living in a small apartment or condominium. Another important factor to keep in mind is that if you are using your car or home for business or have household employees you may need to secure business liability or worker’s compensation insurance to provide liability coverage in those types of special situations.

Before deciding on specific type or amount of personal liability insurance coverage it may be useful to consult with a professional; attorneys, accountants, or financial consultants may be able to help with general information and insurance brokers or agents can provide specific information regarding individual companies, policies, and coverage costs.