What is Personal Liability Insurance?Personal liability insurance is about financial protection – for you and your family. The personal liability coverage within your homeowners policy provides coverage to pay for claims of bodily injury and property damage sustained by others for which you or covered residents of your household are legally responsible. Show
For example, if someone falls down your stairs, or your child accidentally throws a ball through a neighbor's window, breaking an expensive vase, you may be held legally responsible for the damages caused. Many homeowners insurance policies provide a minimum of $100,000 in personal liability coverage, meaning the insurance company can pay up to that amount in total to injured persons per occurrence. If you feel you need more protection, higher limits are available. You can also purchase an umbrella policy which enables you to extend your liability coverage beyond the limits of your primary liability policy. If you don’t currently have personal liability coverage, contact Travelers Insurance or get a home insurance quote today.
What Does Personal Liability Insurance Cover?Personal liability insurance covers a variety of situations where you may be legally responsible to pay for something that happened to someone else on property that you own or, in some situations, on property that you don’t own. Some examples of common personal liability claims are:
Medical PaymentsAnother type of personal liability coverage typically included with your homeowners policy is for medical payments to others. Typically, a homeowners, renters or condo policy provides for the payment of necessary medical expenses for persons who are accidentally injured on your property. This is regardless of whether you are legally responsible. Typically, medical payments coverage limits start at $1,000 per person. Higher amounts of coverage may also be available depending on the type of coverage you choose. What is Not Covered by Personal Liability Insurance?Your homeowners or renters insurance will cover certain personal liability claims, but there are other claims that may not be covered. A few common examples include:
Other Liability Coverage ExclusionsA homeowners, renters or condo policy does not cover all situations of bodily injury or property damage for which you or a covered member of your household may be legally responsible. Most policies contain exclusions and exceptions, so it’s important to understand the details of your specific coverage. To better understand your personal liability coverage and other important insurance topics, talk to your local independent agent or Travelers Insurance representative today. Learning ObjectivesIn this section we elaborate on endorsements that supplement coverage in the HO-3:
Earthquake EndorsementThis endorsement can be added to your policy to cover losses such as those suffered by residents of the San Francisco Bay area when a 1989 earthquake caused damage of $20.3 billion. Unfortunately, only approximately 10 percent of the damage was covered by insurance, despite the frequency of earthquakes in California. The low reimbursement rate is due to several factors, including the failure of the majority of homeowners to purchase the endorsement and the effect of a deductible of 2 percent (in some states, 10 percent) of the insurance applicable separately to dwellings and other structures. A minimum deductible of $250 applies to any one loss. The endorsement covers damage caused by earth movement, including earthquakes, landslides, and volcanic eruptions. Personal Property Replacement Cost EndorsementCoverage C of HO-3 pays for loss on an actual cash-value basis, which means replacement cost minus depreciation. Except for something you bought very recently, you are underinsured from the replacement cost point of view. For example, your four-year-old large-screen television might cost $700 to replace today. If it has depreciated 10 percent per year, the insurer will pay you $420 in the event it is stolen or destroyed this year. You will have to find another $280 if you want to replace it. You can protect yourself from this unfavorable development by adding a personal property replacement cost endorsement to your homeowners policy. In the event of a loss, it will pay you the lowest of the following:
Scheduled Personal Property EndorsementSome of the special limits that apply to personal property may be too low for you. Your jewelry or furs, for example, may be worth far more than the $1,000 limit. Such property can be listed and specifically insured to provide adequate coverage against all risks by adding the scheduled personal property endorsement. Another alternative is to pay an extra premium amount to have the main policy’s limit for a particular category of personal property, such as jewelry, watches, and furs, increased. (Note, however, that this leaves your coverage on a named-perils basis rather than changing it to open perils.) The insurer may require an appraisal at your expense before agreeing to a specified value. Business Pursuits EndorsementPersonal liability coverage and medical payments to others coverage does not apply to bodily injury or property damage arising out of business pursuits of any insured or out of rendering or failing to render professional services. The business pursuits exclusion does not apply, however, to activities that are ordinarily incident to nonbusiness pursuits. For example, your liability exposure in connection with an occasional garage sale would be covered. If you conduct garage sales regularly, however, such activity is a business pursuit and liability coverage does not apply. Liability stemming from rental operations, except for the occasional rental of your residence or rental to no more than two people, is also excluded. Normal part-time employment, such as an after-school job, is not considered a business pursuit. But what about regular, full-time summer employment as a lifeguard? Such employment could be considered a business pursuit. The business pursuits endorsement eliminates these exclusions. Personal Injury EndorsementThe liability coverage of your homeowners policy provides protection against losses caused by bodily injury or property damage for which you may be responsible. Bodily injury is defined as bodily harm, sickness, or disease. It does not include the following, which are considered to be personal injury and are added by the personal injury endorsement:
Could you become liable for personal injury? Suppose you write a letter to the editor of the local paper in which you make a defamatory statement about a person. You could be sued for libel. Or suppose you make an oral defamatory statement about someone. You could be sued for slander. Mold EndorsementThe endorsements of 2002 relate to the mold exclusionsEndorsement adopted by many states to lower the cost of homeowners insurance, particularly mold claims. adopted by many states to lower the cost of homeowners insurance, and particularly mold claims. The ISO “Limited Fungi, Wet or Dry Rot, or Bacteria Coverage” endorsement adds an exclusion to the HO-3 policy (see Chapter 24 "Appendix A"). This endorsement specifies coverage limits per incidence of mold that are lower than the limits available under the HO-3. The endorsement specifies the following definitions: SECTION I—PERILS INSURED AGAINST in form HO 00 03: A. Coverage A—Dwelling and Coverage B—Other Structures Paragraph 2.c.(5) is deleted and replaced by the following: (5) Caused by constant or repeated seepage or leakage of water or the presence or condensation of humidity, moisture or vapor, over a period of weeks, months or years unless such seepage or leakage of water or the presence or condensation of humidity, moisture or vapor and the resulting damage is unknown to all insureds and is hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure. Paragraph 2.c.(6)(c) is deleted and replaced by the following: (c) Smog, rust or other corrosion; B. Coverage C—Personal Property 12. Accidental Discharge or Overflow of Water or Steam Paragraph b.(4) is deleted and replaced by the following: (4) Caused by constant or repeated seepage or leakage of water or the presence or condensation of humidity, moisture or vapor, over a period of weeks, months or years unless such seepage or leakage of water or the presence or condensation of humidity, moisture or vapor and the resulting damage is unknown to all insureds and is hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure. The following exclusion is added: SECTION I—EXCLUSIONS Exclusion A.10. is added. 10. Fungi, Wet or Dry Rot, or Bacteria Fungi, Wet or Dry Rot, or Bacteria meaning the presence, growth, proliferation, spread or any activity of fungi, wet or dry rot, or bacteria. This exclusion does not apply:
Direct loss by a Peril Insured Against resulting from fungi, wet or dry rot, or bacteria is covered. The only other coverage is what is provided under Additional Coverage as bought by the insured and specified in the following table:
These limits of liability apply to the total of all loss or costs payable under this endorsement, regardless of the number of “occurrences,” the number of claims made, or the number of locations insured under this endorsement and listed in this schedule. Including sections of the endorsement here is a way to provide the student with some explanation of how to read the endorsement in Chapter 24 "Appendix A". Key TakeawaysIn this section you studied common endorsements that may be added to the HO-3 for additional coverages and coverage of perils that would otherwise be excluded:
Discussion Questions
Which of the following would not be eligible for coverage under a homeowners policy?Termites and insect damage, bird or rodent damage, rust, rot, mold, and general wear and tear are not covered. Damage caused by smog or smoke from industrial or agricultural operations is also not covered. If something is poorly made or has a hidden defect, this is generally excluded and won't be covered.
Which of the following perils is not covered under Coverage C of an HO policy?Under Coverage C of a Homeowners Policy, all of the following losses are included, except: Property of a roomer, boarder or tenant --- Property of roomers, boarders, or tenants is not covered under the policy.
Which of the following would not be considered part of the insured location under the liability section of the homeowners policy?Which of the following would NOT be considered part of the insured location under the liability section of a homeowners policy? Dwelling replacement cost.
Which of the following would not be covered under Section 2 of the homeowners policy?The policy does not cover all living expenses, only necessary additional living expenses. Which of the following would not be an insured under Section II of the Homeowners Policy? Roomers or boarders are not considered insureds, and would need to purchase their own liability policies.
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