What is personal liability insurance?
First, let's go over what liability insurance does. Liability insurance provides financial protection when someone is found legally responsible for causing injury or damage. In order to prove liability, the plaintiff must show that there was a legal duty owed to them, that it was breached by the actions of the defendant, and that it resulted in damages.
Simply put, personal liability insurance covers you and your family (named insureds and their dependents) for liability arising out of non-business activities anywhere in the world (find out Who Is a Named Insured). This usually includes coverage while on vacation or for adult children while away for studies (as long as they are still your financial dependents). This type of liability coverage is usually included with your homeowners policy.
With personal liability, there are four coverage areas that are commonly seen in the marketplace:
- Personal Liability
- Voluntary Medical Payments: Covers any payments you make to a person accidentally injured without needing to prove liability, up to a certain limit
- Voluntary Payments for Property Damage: Covers payments for unintentional damage to another person's property (if the insured is not legally liable)
- Voluntary Compensation for Residence Employees: Limited to occasional residence employees and must be scheduled onto the policy
On top of paying the damages awarded by the courts, your personal liability policy will also pay some supplementary expenses, including:
- Cost of defense
- Expenses incurred by the insured to assist with their defense
- Court costs assessed against the insured
- Interest accrued before the damages were paid
There are also a few important exclusions to know for this type of policy. There is no coverage for liability arising out of:
- Regular business pursuits
- Rendering professional services
- Intentional or criminal acts
- Abuse of corporal punishment
- Transmission of diseases (STIs or HIV)
Written by Jacques Wong
Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won Insurance Council of BC awards in 2015 and 2020 for academic excellence in the insurance licensing courses. He educates insurance professionals through PNC Learning and as a Thought Leader at ReFrame Insurance.
In his day job as an insurance broker, he helps businesses with creative risk management solutions and strategic advice when it comes to insurance.
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