What Is Personal Lines Insurance?

The term personal lines insurance refers to any kind of insurance that covers individuals against loss that results from death, injury, or loss of property. These insurance lines generally protect people and their families from losses they couldn’t afford to cover on their own. Personal insurance lines make it possible to do things such as driving a car and owning a home without risking financial ruin.

Key Takeaways

  • Personal lines insurance covers individuals against loss resulting from death, injury, or loss of property.
  • Personal insurance lines make it possible to do things such as driving a car and owning a home without risking financial ruin.
  • Coverage generally depends on how much an individual is willing to pay in premiums.

How Personal Lines Insurance Works

As mentioned above, personal lines insurance is any type of insurance coverage purchased by an individual to cover themselves and/or their families. These policies protect against different kinds of personal risks that would lead to potentially crushing financial losses caused by fire, theft, natural disasters, death, accidents, lawsuits, and illness.

Personal lines insurance includes products such as homeowners insurance, flood insurance, earthquake insurance, renters insurance, automobile insurance, life insurance, disability insurance, umbrella insurance, and health insurance. Some types of personal insurance, such as automobile liability insurance, are often required by law. For instance, required minimum levels of automobile liability insurance are common and can vary by jurisdiction. Other types of personal lines insurance, such as comprehensive and collision automobile insurance and homeowners insurance, may be required by lenders when a property is used as collateral for a loan.

The amount of insurance coverage you can get generally depends on how much an individual is willing to pay in premiums—the more someone is willing to pay, the more insurance they can obtain. Individuals can usually tailor each policy’s coverage and deductibles to strike the right balance between the amount of coverage and the cost of premiums. Premiums can also vary according to where you live. 

Personal lines insurance won’t cover every risk an individual might face, but they can dramatically reduce their liability for damages and the dollar amount they might have to pay out of pocket to remedy an unfortunate situation.

Special Considerations

Individuals may be unable to purchase a policy for a particular situation because they pose too great of a risk to the insurance company. For example, someone with a history of cancer may not be able to purchase life insurance. Another example would be a homeowner who wants to buy flood insurance, but whose house is below the flood plain. 

In some cases, high-risk individuals can still purchase insurance, but they will have to pay above-average premiums to compensate the insurer for the extra risk. One common example of this is high-risk auto insurance for drivers, who've received multiple moving traffic violations over a short time or who've been at fault in multiple accidents over a short period of time.

A high-risk individual can still purchase insurance but will have to pay above-average premiums to compensate for the extra risk.

Personal Lines Insurance vs. Commercial Lines Insurance

Personal lines insurance and commercial lines insurance each represent about half of the property and casualty insurance market. While personal insurance lines cover individuals, commercial lines provide insurance coverage to businesses and other enterprises.

Commercial lines insurance helps protect businesses from any losses they may not be able to cover on their own. This kind of insurance not only covers large commercial enterprises but also protects small businesses against risk. Commercial property insurance, commercial auto insurance, casualty insurance, and medical malpractice insurance are all kinds of commercial lines insurance.

It isn't always easy to determine how much coverage a business may require under a commercial policy. That's because the needs of corporations—even small businesses—are much more complicated and complex than individuals who seek coverage. For instance, businesses are dependent on their employees and customers. Consider drivers who use company vehicles. The liability for a company may increase because of an employee's driving habits and behaviors while on the road.