Understanding insurance: Personal liability coverage

Personal liability coverage is included in standard home insurance policies. This type of coverage protects you financially against claims from injuries and damage to other people or property.

To help explain how personal liability insurance works, here is a guide to the basics:

What does personal liability insurance cover?

Personal liability insurance is there to help you if you’re sued or found liable in court. The details can vary from one policy to the next, but here are some examples of situations included in most personal liability coverage:

• Somebody is injured in your home or at another property you own.
• Somebody is injured as a result of a traffic accident.
• Property damage.
• Certain lawsuits such as those for libel, slander or false arrest.
• Paying court fees for lawsuits brought against you.

Some of these scenarios are normally covered by other types of insurance, like home and auto. However, the personal liability coverage is for anything beyond the limit of other policies. For example, if you’re liable for somebody’s medical bills after they’re injured on your property, it would be the amount over and above what that individual’s insurance could pay.

What does personal liability insurance not cover?

It’s crucial to know what might be excluded from your personal liability coverage. Some examples include:

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• Bodily injury to you or another person living in your household.
• Business-related accidents.
• Workers compensation for your employees.
• Damage to your own property.

For the above scenarios, there may be other specific types of coverage to help instead, such as business liability insurance. If you sustain injuries or property damage, your medical and homeowners insurance would be responsible.

Whether you need personal liability insurance is entirely up to you. If you’re not sure of the best choice, consult with a financial advisor to identify any possible sources of liability you might want coverage for.