What Is Personal Liabilities Insurance? A Look At Its Coverage

Comprehensive Personal Liability (CPL) insurance, commonly referred to as personal liability insurance, is an integral part of both homeowners and umbrella insurance policies.

This coverage safeguards you and members of your household from claims arising due to injuries or damage to third parties and their property.

By providing financial protection, it alleviates the burden of significant out-of-pocket expenses in the event that you are deemed legally responsible for any harm caused to others.

What is personal liabilities insurance
Personal liability insurance, or CPL insurance, is part of homeowners or umbrella policies, shielding you and your household from claims due to injuries or damage to others and their property: Photo source (NerdWallet)

Understanding Personal Liability Insurance

Personal liability insurance falls under the broader category of liability insurance or “third-party insurance.” It covers mishaps to others caused by you.

This type of insurance protects against claims related to bodily injury or property damage resulting from personal activities.

You can obtain personal liability coverage in three ways:

  1. It’s included in your homeowners, renter’s, or dwelling insurance policy, often referred to as “comprehensive personal liability.”
  2. You can purchase it as a standalone policy if you don’t own or rent physical property.
  3. Add it to an existing policy, such as a personal auto or watercraft policy.

When included in a homeowners policy, personal liability coverage doesn’t restrict itself to the insured premises; it can extend to incidents elsewhere.

The policy covers bodily injury or property damage, including attorney fees, court costs, and settlements up to the specified amount in the insurance contract.

What Does Personal Liability Insurance Cover?

Common liability claims often don’t reach the lawsuit stage. Some examples include:

  1. Your dog bites a visitor.
  2. The mail carrier slips in your driveway.
  3. You’re at fault in a multicar collision.
  4. Your teenager’s unattended lit cigarette causes a house fire.

Homeowners policies typically offer $100,000 to $300,000 in personal liability coverage.

Umbrella policies extend coverage to $1 million or more, filling the gaps and covering claims like libel and slander.

They’re particularly useful when your homeowners policy limits are insufficient for the claim or legal expenses.

How Personal Liability Insurance Policies Work Together

Let’s say your personal liability coverage under your homeowners insurance maxes out at $300,000. You also have a personal liability umbrella insurance policy that maxes out at $1 million. You’re sued for $800,000 for a covered incident and—gulp—the plaintiffs win.

You’ll first pay your homeowners insurance deductible, say $1,000. Then your homeowners insurance will pay the next $299,000 of the judgment, which gets you to that policy’s $300,000 maximum. The umbrella policy will pay the remaining $500,000. You won’t have to come up with that half-million from your personal assets—thanks to your high amount of comprehensive personal liability coverage.

What Is The Difference Between Personal Liability And Property Liability

The difference between personal liability and property liability is that property liability covers damage you cause to another person’s property, such as in a car accident, while personal liability covers damage or injury to another person which you are legally liable for.

What Does Personal Liability Cover?

Personal liability insurance usually includes coverage (up to a specified amount) for injuries that happen on your property, damage caused by you or your household to another property, and legal expenses in case you face a lawsuit related to such damage or injuries.

Read more: What is cyber liability insurance?

How Much Personal Liability Coverage Do I Need?

Many insurers offer personal liability coverage for $100,000, $300,000, or $500,000.

Common guidance is to take out a policy worth double your net worth, and use umbrella insurance if you need more than what personal liability insurance will cover.

The Bottom Line

Personal liability insurance protects you from substantial expenses in the event that you are held responsible for causing damage or injury to someone else.

It may come with your homeowners insurance, but you can also buy it separately.

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