# Understanding Personal Lines Insurance: Definition, Coverage, and Benefits

## What Is Personal Lines Insurance?

Personal lines insurance is coverage designed to protect individuals and families from personal risks, such as death, injury, or loss of property. It plays a vital role in everyday life, making it possible to drive a car, own a home, or cover medical expenses without facing financial ruin. Common types of personal lines include auto, health, and homeowners' insurance. Coverage levels depend on factors like premiums, risk assessments, and the specific policies chosen.

### Key Takeaways

*   Personal lines insurance protects individuals and families from losses due to death, injury, or property loss, allowing activities like driving and homeownership without financial ruin.
*   The coverage of personal lines insurance policies can be tailored by individuals through the adjustment of premiums and deductibles, giving flexibility to meet personal financial needs.
*   Some personal lines insurance, like automobile liability insurance, are mandatory by law, while others, like homeowners' insurance, might be required by lenders under certain circumstances.
*   High-risk individuals may face challenges obtaining certain types of personal insurance or might have to pay elevated premiums to cover the perceived increased risk to insurers.
*   Personal lines insurance differs from commercial lines insurance, which serves businesses, and together they encompass a significant share of the overall property and casualty insurance market.

## Understanding the Mechanics of Personal Lines Insurance

Personal lines insurance is any type of [insurance coverage](https://www.investopedia.com/terms/i/insurance-coverage.asp) 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](https://www.investopedia.com/financial-edge/0311/the-financial-effects-of-a-natural-disaster.aspx), death, accidents, lawsuits, and illness.

The amount of insurance coverage you can get generally depends on how much you are willing to pay in [premiums](https://www.investopedia.com/terms/p/premium.asp). The more you are willing to pay, the more insurance you can obtain. Individuals can usually tailor each policy’s coverage and [deductibles](https://www.investopedia.com/terms/d/deductible.asp) 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. However, it can dramatically reduce the policyholder's [liability](https://www.investopedia.com/terms/l/liability.asp) for damages and the dollar amount they might have to pay out of pocket to remedy an unfortunate situation.

## Exploring Different Types of Personal Lines Insurance

Personal lines insurance includes products such as [homeowners insurance](https://www.investopedia.com/terms/h/homeowners-insurance.asp), flood insurance, earthquake insurance, renters insurance, automobile insurance, life insurance, [disability insurance](https://www.investopedia.com/terms/d/disability-insurance.asp), umbrella insurance, and health insurance. Some types of personal insurance, such as [automobile liability insurance](https://www.investopedia.com/terms/a/automobile-liability-insurance.asp), are often required by law. 

Required minimum levels of automobile liability insurance are common and vary by state or jurisdiction. Lenders may require comprehensive, collision automobile, and homeowners' insurance when using property as loan [collateral](https://www.investopedia.com/terms/c/collateral.asp).

## Important Considerations in Personal Lines Insurance

Individuals may be unable to purchase a policy for a particular situation because they pose too great a risk to the insurance company. For example, someone with a history of cancer may not be able to purchase [life insurance](https://www.investopedia.com/terms/l/lifeinsurance.asp). Another example would be a homeowner who wants to buy [flood insurance](https://www.investopedia.com/terms/f/flood-insurance.asp), but whose house is below the flood plain. 

High-risk individuals might still get insurance, but must pay higher premiums for the added risk. A common example is high-risk auto insurance for drivers with multiple traffic violations or accidents in a short time.

### $1,245

The average annual full-coverage insurance cost for medium sedans in 2020.

## Comparing Personal and Commercial Lines Insurance

Personal lines insurance accounts for about 53% of [net premiums written](https://www.investopedia.com/terms/n/net-premiums-written.asp) in the property and casualty insurance market, while commercial lines insurance accounts for about 47%. While personal lines insurance covers individuals, commercial lines insurance provides 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](https://www.investopedia.com/terms/m/malpractice-insurance.asp) 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](https://www.investopedia.com/terms/c/corporation.asp)—even small businesses—are much more complicated and complex than individuals who seek coverage.

For instance, businesses are dependent on their employees, whose actions may put the business at risk for lawsuits or damages should an accident occur. 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.

## The Bottom Line

Personal lines insurance exists to protect individuals and families from financial losses caused by unexpected events like death, injury, or property damage. It allows people to own homes, drive cars, and manage health expenses without the risk of financial ruin.

The cost of coverage depends largely on premiums, which can be higher for those considered higher risk. Common types of personal lines include homeowners', auto, life, and health insurance, each addressing different needs.

Unlike [commercial lines insurance](https://www.investopedia.com/terms/c/commercial-insurance-lines.asp), which is designed for businesses, personal lines are tailored specifically to safeguard individuals and their families.  

> **Article Sources**
>
> 1.  AAA. "[Your Driving Costs, 2020](https://newsroom.aaa.com/wp-content/uploads/2020/12/2020-Your-Driving-Costs-Brochure-Interactive-FINAL-12-9-20.pdf)," Page 5. Accessed June 6, 2021.
>     
> 2.  Insurance Information Institute. "[Facts and Statistics: Commercial Lines](https://www.iii.org/fact-statistic/facts-statistics-commercial-lines)." Accessed June 6, 2021.