In the insurance industry, the term “line” refers to a class of insurance. Lines of insurance can be anything from a marine line to a commercial line and beyond. Personal lines insurance is simply the type of insurance that protects individuals and families against financial loss due to injury, death or loss of property they own.
Personal Lines Insurance Definition
One catastrophic event could put you in serious debt, whether it’s something as common as a car accident or something less likely, like a hurricane or tornado. Personal lines insurance refers to any type of insurance that protects you and covered loved ones personally, including your home, car, health and life. You can also purchase an umbrella policy, also considered personal lines insurance, to cover anything your other policies don’t include.
But it’s important to routinely evaluate the various policies you have to ensure they pass the personal lines insurance test. To make sure you have enough, take a look at your savings and whether it would cover you if you had a significant loss. With auto insurance, for instance, you’ll look at how much health insurance you have to cover your own medical bills if you were seriously injured in an accident, then get enough to cover the car and the estimated cost of injuries or loss to other parties.
In addition to homeowners, renters, automobile, life and health insurance, the personal lines insurance definition also includes as-needed policies like flood and earthquake insurance. Certain types of personal lines insurance, such as auto insurance, are required by law in some states. However, beyond the minimum required by law, each individual is allowed to choose how much personal lines insurance to obtain.
Personal Lines Versus Commercial Lines
Personal lines insurance can be best understood by comparing it to commercial lines insurance. Like the personal lines insurance definition, commercial lines insurance refers to policies that protect a business’s finances against loss. But the two types of policies are different in many ways.
When you work with a broker that has a commercial or personal lines insurance license, you agree to pay premiums in exchange for protection. For a personal insurance policy, the party insured is generally an individual, his spouse and any dependents. Business insurance policies are set up based on type – for example, sole proprietorship, partnership or limited liability corporation.
Although both insurance lines seek to reduce liability, a business’s liability often extends to the behaviors of other people. A business owner may own vehicles driven by employees, for instance, and need insurance that can cover any accidents that happen as a result of an employee’s behaviors. Therefore, determining how much commercial insurance a business needs can be more complicated than passing the personal lines insurance test.
Commercial and Personal Lines Brokers
A personal lines broker-agent is authorized to sell and manage auto, residential property, personal watercraft and umbrella or excess liability insurance in the state in which she is licensed. The average salary for a personal lines insurance agent is in the mid-$30,000 range, and it requires a personal lines insurance license in the state in which the agent wants to do business. The career has seen a dramatic decline in recent years, though, as consumers have moved directly to the internet for buying insurance policies, rather than working with an agent.
That doesn’t mean personal lines insurance agents are gone entirely, though. But before an agent goes through the process of taking the personal lines insurance test to get licensed, it might be wise to consider getting a commercial insurance license. Typically, an agent will earn bigger commissions with a commercial license than a personal lines insurance license, and businesses may be more likely to use an agent due to the complexities involved.
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Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.