What is personal liability insurance in home insurance?

Accidents happen. A tree on your property might fall into a neighbour’s yard, causing damage to an expensive set of patio furniture. Or a visitor to your home might slip and fall while getting out of the backyard swimming pool and end up with a concussion. Your beloved dog might even break free from his leash and end up sinking his canine incisors into another dog. In these types of unpredictable situations, personal liability insurance is there to protect you in case the worst occurs. 

Personal liability insurance offers protection from lawsuits or damages that can happen due to an accident (the rope snaps on a homemade swing, leading to a fall) or negligent behaviour (forgetting to salt the driveway, causing someone to trip and fall on ice). It’s what you can rely on when unintended real-life consequences happen even though no one is at fault. While it’s not a legal requirement to be covered by personal liability insurance, it can provide peace of mind. 

Who needs personal liability insurance in Canada? 

Due to the risks associated with owning property, personal liability insurance is typically already included in all forms of property insurance, whether that’s home insurance, condo or tenant insurance. Anyone can be held responsible for accidents that happen on their property, which is why this coverage is there in the first place. It is not typically available to purchase as a standalone policy, according to Anne-Marie Thomas, Director of Consumer and Industry Relations at the Insurance Bureau of Canada. 

What does personal liability insurance cover? 

Personal liability insurance covers claims that relate to bodily injury or property damage. For example, say, someone trips and falls on a patch of ice in your driveway, causing a broken tooth and hefty emergency dentist bill. In that case, personal liability insurance would cover the cost of the individual’s new tooth. It may also cover the legal fees that arise if the person decides to sue you over the damage they have incurred.  

Related: How is fault determined in the world of home insurance? 

What does personal liability insurance not cover?  

There are specific situations that are not covered by personal liability insurance. It will not cover instances of deliberate injury to others, nor injuries or damages impacting yourself or members of your household. It will also not cover damages related to your automobile (that would be covered by your auto insurance policy), nor damages resulting from a business activity in your home, unless you have a specific home-based business policy.  

However, each policy is different so make sure to read the fine print or check in with your representative if you have specific questions. 

What is the typical amount offered with personal liability coverage? 

The amount of personal liability coverage in a policy is calculated based on any factors that increase the amount of risk in the home. A typical policy includes up to $1 million in coverage, says Thomas, although “people can choose to increase their liability limit if they’re worried about a lawsuit as a result of something on their property that may cause concern.”  

For example, a ceramicist who operates a kiln on their property may have a higher liability limit due to the increased fire risk caused by firing clay at extremely high temperatures. Other factors that might increase the limit include a pool or a hot tub. Some policies will offer up to $10 million in personal umbrella coverage.  

Generally, the size of a personal liability settlement will depend on the severity of damage. An accident that leads to chronic pain and permanent disability might go all the way into the multi millions. According to De Rose Lawyers, a client who sustained traumatic neck and spinal cord injuries after slipping and hitting his head on a sailboat, received a $2.75 million settlement. However, the amount will vary based on the facts of the individual case.  

“It’s really important when you are purchasing a home, tenant or condo policy that you explain everything that happens in your home to an insurance professional,” says Thomas. “What you don’t want is for something to happen and you find out you have no coverage because the insurance company didn’t know.” 

Why do you need personal liability insurance? 

In short, because anything can happen. You never know what random hazard is around the corner, waiting to take you by surprise. Liability claims can be huge in order to account for any personal damages stemming from lost income due to inability to work. 

According to a Parachute report on the Cost of Injury in Canada, preventable injuries cost the Canadian economy $29.4 billion in a single year. In 2018, injuries were responsible for 231,530 hospitalizations and 61,400 disabilities. In such cases, it’s important to have personal liability insurance in order to protect yourself against being held accountable for one of these instances.  

Can you opt out? 

Personal liability insurance is automatically one of the things you’re covered for when it comes to home insurance.  

“I’ve never heard of anyone opting out [of personal liability insurance],” says Thomas. “It’s not like car insurance where each premium is separately broken out.”  

If you wish to opt out, or if you think your coverage amount is insufficient, it’s best to contact your individual insurance representative who can walk you through specifics of your policy. Ultimately, most people could benefit from personal liability insurance.