Personal Liability Coverage for Homeowners

You probably know your homeowners insurance policy will pay for damage to your home. But did you know that it can also help defend you from lawsuits? That’s because most homeowners policies include personal liability insurance. Here’s how it works.

Personal liability insurance covers you if you accidentally hurt someone or damage their property. If the incident results in a lawsuit, your policy can pay your legal fees and damages. Personal liability coverage usually covers everyone in your household, including kids and pets.

Here’s a scenario in which you might need this coverage:

Your deck gets slippery during a summer pool party, and a guest trips and falls. She breaks her elbow and sues you for medical expenses, plus pain and suffering. Your personal liability insurance could cover your legal defense. If the court finds you liable for the injury, your policy could also pay damages up to your coverage limit.

Personal liability coverage is a standard part of a homeowners insurance policy. You'll also find it in other types of home insurance policies, such as renters and condo insurance. (Learn more about renters liability insurance.)

Another part of your homeowners policy, medical payments coverage, can also help if someone gets hurt on your property. It's a "no-fault" coverage, so it can pay even if you’re not responsible for the injury. But because this coverage has low limits, it's appropriate only for minor incidents. For bigger claims or lawsuits, your personal liability insurance would pay.

» MORE: What does homeowners insurance cover?

By law, you don't need personal liability insurance to own a house. But mortgage lenders generally require you to buy homeowners insurance, which includes liability coverage.

If you don't have a mortgage, you could choose to go without homeowners insurance. Before deciding to do this, weigh the financial risk you’d face if someone sued you or your house burned down.

Personal liability insurance covers harm you do to other people or their belongings. It can cover incidents on your property or elsewhere.

Below are some scenarios your personal liability insurance would probably cover.

Injuries you cause

You round a corner while jogging and crash into a pedestrian, knocking him off the sidewalk. He breaks his ankle and has to miss work for a couple of months. He sues you for medical expenses and lost wages.

Injuries on your property

A UPS driver slips and falls on your icy front steps while delivering a package. She files a lawsuit, accusing you of negligence because you failed to put down salt that morning.

Injuries caused by your pet

Your dog Fluffy gets a little over-excited at the park and bites a child’s hand, leaving a wound that needs stitches. The child’s parents file a claim against your homeowners policy for their medical costs. (Note: Some insurers won’t cover certain dog breeds or animals with a history of aggression. Check with your insurance company to make sure it will cover your dog.)

» MORE: Does homeowners insurance cover dog bites?

Damage caused by someone in your household

Your son hits a long fly ball through a window at his best friend’s house. It shatters not only the glass but also an expensive vase sitting inside. Your liability insurance could pay for the damage.

Damage on your property that affects other people’s homes

A tree in your yard falls onto your next-door neighbor’s roof. Because the tree was dying and you hadn’t gotten it professionally removed, you're at fault for the damage.

» MORE: Does homeowners insurance cover tree removal?

Below are some scenarios that personal liability insurance generally won't cover, plus advice on which other policies might. For a full list of exclusions, check your homeowners policy.

Car accidents

You run a red light and crash into an SUV. All three passengers in the other vehicle are hurt, and the SUV is totaled. Your liability car insurance would pay medical and repair costs for the people in the other vehicle.

Business liability

You run a business out of your home, and one of your clients sues you for giving bad advice. Personal liability insurance usually won’t cover lawsuits connected to business pursuits. Instead, you’ll need business insurance.

Injuries to people within your household

Your daughter, who lives with you, trips and falls down the basement stairs. If she were a guest in your home, personal liability insurance might cover her injuries. But because she’s a member of the household, she’ll have to rely on her own health insurance for treatment.

Intentional harm

Your teenage son and his friends spray-paint rude messages all over the outside of a local store. Because they caused this damage on purpose, it’s a crime, not an accident or act of negligence. Your liability insurance is unlikely to cover your son’s defense.

» MORE: 10 kinds of damage home insurance won’t cover

Homeowners insurance policies usually offer liability limits between $100,000 and $500,000. Companies that target wealthier consumers, like Chubb, sell amounts well into the millions.

The amount of personal liability insurance you choose depends on the value of your assets, your chance of being sued and your tolerance for risk.

Consider buying at least enough personal liability insurance to cover all your assets. When tallying up your assets, include things like:

• The value of your house.

• Bank accounts.

• Investments, including retirement accounts.

• Valuable items such as cars and jewelry.

Note that not all your assets may be subject to lawsuits. For example, federal law protects most employer-sponsored retirement accounts such as 401(k)s.^[0]

Some states have laws to shield IRA accounts and the equity you have in your home. Check your local laws or consult a financial advisor if you’re not sure how much liability coverage to get.

Beyond the value of your assets, consider your risk of being sued. You might want to choose a higher liability limit if any of these statements apply to you:

• You have hobbies that could injure others, such as skiing, hunting or surfing.

• You have a swimming pool, trampoline or other “attractive nuisance” on your property. (An attractive nuisance is something that could lure children onto your property.)

• You own a dog. (Make sure your insurer will cover the breed.)

• You’re a public figure or a wealthy member of the community.

• You often host parties in your home.

» MORE: How to find the best umbrella insurance

You’ll likely buy personal liability insurance as part of a homeowners policy. The average cost of homeowners insurance in the U.S. is $2,110 per year, according to NerdWallet’s rate analysis. That rate reflects a $300,000 liability limit, but it typically doesn't cost much to add more coverage.

If an incident occurs that could lead to a claim on your liability insurance, let your insurer know. Your policy may require you to notify your insurer “as soon as is practical.” If instead you wait until someone serves you notice of a lawsuit, your insurer may not cover the claim.

Right after the incident, do your best to document what happened. For example, you might want to:

• Take photos or video of the area. 

• Exchange contact information with witnesses.

• Write down an account of what happened so you don’t forget the details later.

Having this type of evidence can help if the insurance company needs to defend you in a lawsuit.