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Think your homeowners or renters insurance policy is just about covering your physical home and the stuff inside it? Think again. Most homeowners and renters policies include personal liability insurance coverage, as well — an important type of coverage that can really come in handy if you end up needing it.

Personal liability insurance coverage pays out in the event someone is accidentally hurt or has their belongings damaged on your property, as well as accidental property damage that you or your family may inflict on someone else outside your home. Personal liability coverage helps keep you from paying out of pocket for legal fees and medical bills that can arise from these situations — which can avert a financial catastrophe, given how expensive those costs can be.

Read on to learn more about this important type of insurance coverage and how to ensure you have it (and enough of it, at that).

What Is Personal Liability Insurance?

Now that we’ve got a basic definition of personal liability insurance — insurance that covers expenses you may be liable for in case of accidental injury or damage — let’s take a look at an example.

Say you have a friend over at your house and they accidentally fall down the stairs into your basement, breaking their ankle (and getting really freaked out) in the process. Even a good friend might sue you for damages under these circumstances, not least because medical expenses are so, well, expensive. If your friend doesn’t have medical insurance, the broken ankle alone might cost them up to $2,500 if it’s a simple break that requires a cast… or orders of magnitude higher if it requires surgery.

Chances are you don’t have thousands of dollars to pay out of pocket for your friend’s medical bills, not to mention any legal fees you might incur if they should decide to actually bring you to court on top of all that. Personal liability insurance can come to the rescue here, paying out up to your coverage limit so your assets are protected.

Along with accidental injuries that occur in your home or on your property, personal liability insurance can also protect you from accidental damages perpetrated by your family. For example, maybe your 12-year-old boy accidentally throws a football through your neighbor’s window (oops), shattering the glass and also breaking an expensive picture frame in the process. Personal liability insurance can payout in this instance, too. Phew!

What Does Personal Liability Insurance Cover?

Personal liability insurance can certainly be a godsend in applicable situations, but it doesn’t cover everything. You should always review your policy information to ensure you know exactly what’s covered by your specific plan, but generally speaking, here are the types of expenses personal liability insurance covers:

•  Medical bills incurred by visitors who accidentally get injured at your home or as a result of your negligence

•  Legal fees incurred if a visitor sues you for injury or damages to their property

•  Actual property damage sustained by a visitor to your home, or as a result of your negligence

•  Bodily injury and property damage caused by your pets or children, both on and off your home property

As with most other forms of insurance, even covered damages can only be paid up to the given limit written into your policy. For many homeowners insurance plans, that limit is $100,000 per occurrence at a minimum, though there may be specific clauses about how those monies are paid out (more on this in just a minute when we discuss medical payments).

If you decide you need additional coverage, you may be able to obtain it through your homeowners or renters insurance policy (though it may drive up your premium cost). You might also choose to purchase an umbrella insurance policy, which extends your personal liability coverage substantially. Umbrella insurance can be a good idea for those with high net worths or who are at high risk of a personal liability claim.

Recommended: What Is Renters Insurance and Do I Need It?

Medical Payments

Most personal liability policies will pay out for the medical expenses of people accidentally injured on your property, even if they don’t sue you for those damages (or you’re not otherwise legally obligated to pay).

However, these medical payments come with their own limits, which may be as low as $1,000 per person. Again, you may be able to purchase higher amounts of coverage, but it’s important to thoroughly review your insurance policy to understand exactly what you’re getting.

Recommended: Beginner’s Guide to Health Insurance

What Is Not Covered by Personal Liability Insurance?

We’ve talked a lot about what personal liability insurance covers. But what, specifically, is excluded?

Personal liability insurance does not cover:

•  Injuries or property damages caused intentionally by you or your family — liability insurance is for accidents only

•  Liability resulting from a car accident — that’s what car insurance is for!

•  Accidental injuries or damages you or your family sustain in your own home

•  Any bodily injury or damage that occurs as a result of business or professional activities, even if those activities are occurring in your home (that’s why you need a separate business insurance policy)

Of course, the list of what’s not covered by a personal liability insurance plan is always going to be substantially longer than the list of what is covered. If you have questions about your coverage, speak with your insurance agent directly or refer to your policy documentation for full details.

What Else You Need to Know About Personal Liability Insurance

Like other portions of your homeowners or renters insurance policy (or any policy, for that matter), when it comes time to file a personal liability claim, you may still be responsible for some of the expenses. This is called the deductible, and it’s the amount you pay out-of-pocket to cover the damages you’re filing the claim for.

Many homeowners insurance policies have a deductible of $1,000. So, for example, if you’re held accountable for $30,000 of medical and legal fees resulting from a personal liability claim, you’d pay $1,000 and your insurance company would pay $29,000 toward those expenses.

The deductible is separate from the premium cost you pay on a monthly, quarterly or annual basis simply to keep the policy active. And while it may feel like a burden, even a high deductible is a way better deal than having to pay for the entire cost of the damages out of pocket in most cases.

The Takeaway

Personal liability insurance is a type of coverage that protects your assets by paying for bodily injury and property damage accidentally sustained by visitors to your property (or perpetrated by you or your family off your property). This type of coverage is generally baked into a homeowners or renters insurance policy, though you can also purchase additional umbrella insurance coverage to extend your personal liability limit.

While personal liability coverage — and homeowners/renters insurance as a whole — is certainly an important kind of protection, it’s not the only one you should rely on. If you have family members and loved ones who rely on your earnings, you should consider purchasing life insurance, which will help ensure they’ll continue to be taken care of should something happen to you.

SoFi has teamed up with Ladder to offer competitive, easy-to-understand life insurance policies that range from $100,000 to $8 million, and we’ll even help you draft your will and estate plan for free. We don’t require medical tests for eligible applicants, so you can get a decision in minutes — today.

Get your life insurance quote in just minutes.

Photo credit: iStock/Edwin Tan

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Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Since the launch of Bitcoin in 2009, thousands of different cryptocurrencies have entered the market, providing investors with an intriguing — and sometimes confusing — array of choices.

While investing in crypto may offer growth potential, cryptocurrencies as a whole have proven to be a volatile asset class, posting double-digit percentage gains and losses — sometimes within a single day. While such wild price swings have generated lucrative returns for some, others have suffered painful losses.

It’s important for investors to understand the fundamentals and risks of the cryptocurrency market before they start investing. Here’s a closer look at some basics.

Cryptocurrencies 101

Some consider cryptocurrencies to be a form of currency, while others see them as a store of value similar to gold. While the Securities and Exchange Commission (SEC) has yet to decide whether cryptocurrencies can be considered securities or commodities, the reality is that these new instruments have revolutionized the way we think of finance and financial markets.

Not that anyone could have predicted that in 2008, when a person or group using the pseudonym Satoshi Nakamoto published a paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Despite the mystery surrounding Nakamoto’s identity, bitcoin successfully launched in January of 2009.

The first altcoins — a term that refers to “alternatives to bitcoin” — were released in 2011, including Litecoin.

News reports tied use of bitcoin and other cryptocurrencies to illegal activity on the dark web. Some major scams and company failures, including the theft of hundreds of thousands of bitcoin on the crypto exchange Mt. Gox, contributed to volatility in the market’s early years.

However, by 2017, mainstream interest in bitcoin and other cryptocurrencies skyrocketed, sending its price close to $20,000. Despite ongoing price fluctuations, by 2021 bitcoin was not only the oldest crypto on the market but still the largest by market cap.

In November 2021, bitcoin would reach an all time high of nearly $69,000 and a total market cap of nearly $1.1 trillion, while the entire crypto market surpassed some $2 trillion in market value.

However, worries of a regulatory crackdown caused many crypto prices to fall in December 2021, as SEC Chair Gary Gensler indicated that many crypto might qualify as securities and thus fall under SEC regulations.

Blockchain 101

Not every cryptocurrency is built using blockchain technology, but some of the largest ones are. A blockchain is an unchangeable record of transactions. These transactions don’t have to be monetary in nature. Blockchains can be used to create contracts, to track the movement of products, to record votes, to prove that property transfers took place, and much more.

Cryptocurrencies and blockchains work hand in hand. For example, here’s how Bitcoin mining works: new coins are created through the process of maintaining the accuracy of its blockchain. Miners use computing power to solve complex cryptographic equations. As these equations are solved, they prove that all of the transactional information on the bitcoin blockchain is accurate.

As a reward for maintaining the blockchain, Bitcoins are created and given to the miners. The bitcoin blockchain is public and decentralized. This means that anyone can view any transaction between two bitcoin addresses. However, you don’t know who owns those addresses.

The decentralization of the blockchain means that there isn’t a single individual, company, or government in charge of Bitcoin and the blockchain. Changes to the blockchain code can be proposed and adopted by the miners. However, 51% or more miners must opt into a change in order for it to be implemented, otherwise Bitcoin forks into two markets.

Cryptocurrency Risks

Every investment comes with risks, and cryptocurrencies are no exception. Here are some the biggest ones investors should be aware of:

1.    Price Volatility: As mentioned, the price of Bitcoin halved within the span of a couple weeks in 2021. While the stock market is known for being a volatile asset class, the turbulence in share prices is nowhere near that of cryptocurrency prices. The market is still highly speculative, making it prone to big price swings and increasing the risk of investors locking in losses.

Recommended: Why is Bitcoin So Volatile?

2.    Theft: One of the choices investors have to make after buying cryptocurrencies is whether to store the coins and tokens in a hot wallet or cold wallet. Hot wallets are digital storage tools. The risk to them is that they’re more vulnerable to hacks and theft. Take for instance the Mt. Gox incident that occurred in 2011. While the cryptocurrency market has come a long way in terms of security since then, theft and hacks are still a risk.

3.    Fraud and Scams: The buzzy nature of the cryptocurrency industry unfortunately means that scammers are also drawn to the market. In 2021, the Federal Trade Commission (FTC) reported that between October 2020 and May 2021, more than 7,000 people reported losses of more than $80 million from bogus investment opportunities.

4.    Forgotten Keys: While the cold wallet storage solution can prevent hacks, some users of this method have fallen into the unfortunate situation of not remembering their wallet password – or “keys” in crypto lingo. That means there could be fortunes that individuals are not able to cash in on. Of the existing 18.5 million Bitcoin in circulation in January 2021, about 20% was estimated to be “lost” or trapped in a wallet.

5.    Regulatory Oversight: Chinese regulators stoked volatility in the cryptocurrency market in 2021, after clamping down on crypto mining operations and ordering payment firms to not do business with companies in the industry. U.K. regulators have also banned a leading crypto exchange. More crypto rules and regulation, including from countries like the U.S., are also expected, which could cause repercussions for usage and prices.

Basic Cryptocurrency Terminology to Know

As cryptocurrency has been growing over the past decade, industry jargon has developed. This terminology is important to know when starting to purchase and store cryptocurrencies. Here are some of the most commonly used words in the crypto space:

Address

If you’re using bitcoin, you have a public “address” where people can send you bitcoins. If you send someone bitcoins, they will see that they received them from your public address. Anyone can look up that public address and see how many bitcoins are in it.

You also have a private address, which is how you secure your bitcoins. Never give anyone your private address. Addresses are generally made up of a string of alphanumeric characters.

Altcoin

Any cryptocurrency that is not bitcoin is called an altcoin.

Crypto

Crypto is simply a shorter name for cryptocurrency.

Decentralization

As mentioned above, blockchain isn’t owned or controlled by anyone, making it decentralized. Many people in the blockchain space feel that decentralization creates more fairness.

Distributed Ledger

A dispersed recording of replicable, synchronized data. In the case of cryptocurrencies, the blockchain is a distributed ledger shared across many different computers and networks.

Exchange

Websites where you can purchase and sell cryptocurrencies are called exchanges.

Fork

A “fork” is when a blockchain permanently splits into a new version. This can take place when miners vote on a change, when a group takes over 51% of the network and changes the blockchain, or if there’s a bug or more commonly a new set of consensus rules come into existence.

FUD

Fear, uncertainty, doubt. FUD describes the emotions that can create panic and cause people to make decisions that affect the market.

HODL

HODL is the philosophy of holding onto and not selling cryptocurrencies. A misspelling of “hold,” this was a joke that became a common term.

ICO

ICO is short for initial coin offering. An ICO is held when a company is raising funds and sells tokens to public or private buyers who then become backers of the project.

Mining

The computing process used to create crypto tokens. Not all cryptocurrencies are created using mining, but it is a common method.

Multisig

There are ways that you can set up a cryptocurrency transaction which require multiple people to sign off on the transaction for it to go through. This is called a multisig transaction.

Peer to Peer

A peer-to-peer (more commonly abbreviated as “P2P”) system doesn’t have a central controller; instead, users interact directly with one another. For example, there are peer-to-peer exchanges where you can sell your bitcoins directly to someone in your local area.

Pumping

When cryptocurrency information gets sensationalized in the media to raise its price or popularity, this is called pumping.

Smart Contract

Smart contracts are coded contracts written into blockchains that allow automated transactions to be executed.

Wallet

Cryptocurrencies are stored in virtual “wallets.” If you keep your cryptocurrencies on an exchange, that exchange controls your wallet. You can also use a digital wallet such as an app on your phone or computer.

One popular form of cryptocurrency wallet is a hardware wallet, which is like a flash drive that stores your cryptocurrencies offline but allows an easy connection to your computer for transacting. There are also paper wallets, which are (believe it or not) simply written records of your public and private addresses for your cryptocurrency. Online wallets are called hot wallets, while offline wallets are called cold wallets or cold storage.

Whale

A person who owns a significant amount of a cryptocurrency. When that person trades it they can actually affect the market price. These people are called whales.

The Top 10 Largest Cryptocurrencies

There are more than 7,000 cryptocurrencies on the market today, according to estimates. Each of them offers different characteristics in their transaction times, liquidity, privacy, and other factors.

Below are the top 10 biggest by market cap, as of July 23, 2021, according to data from CoinMarketCap, which calculates cryptocurrency market caps by taking the price of a digital currency and multiplying it by the number of coins in circulation.

For instance, with Bitcoin, the world’s biggest cryptocurrency by market cap, the price is $32,439.03 and the circulation supply is 18,764,331 on July 23, 2021. Multiplying the two numbers gets a market cap of about $609 billion. CoinMarketCap does this with the biggest cryptocurrencies and then ranks by the market cap of each.

Recommended: Top 30 Crypto By Market Cap

1. Bitcoin

As the first to market, Bitcoin (BTC) continues to be the most popular and highest valued crypto. Any new industry development — including physical ATMs and crypto credit cards — generally works with Bitcoin first.

Major companies now accept Bitcoin, but Bitcoin has a scalability issue, in that it currently can only process seven transactions per second. Visa®, by contrast, can process a maximum of 24,000 per second. Work is being done to improve this transaction speed, but for now Bitcoin may not be the best long-term store of currency to buy your latte with.

2. Ethereum

Although ethereum (ETH) is a cryptocurrency — also known as ether — its main appeal stems from its software platform. The Ethereum network allows for the creation of smart contracts and decentralized applications to be built on it. The cryptocurrency is used to develop and run applications on the software platform, and by investors purchasing other tokens using ether.

3. Tether

Tether (USDT) was the first cryptocurrency marketed as a “stablecoin” – virtual money designed to maintain a fixed value. In the case of Tether, the value of the coin is pegged to a fiat currency – the U.S. dollar. Hence, its ticker is USDT.

In February 2021, the New York attorney general’s office settled a two-year investigation on tether and its sister crypto exchange Bitfinex. Tether had claimed that all its tokens were backed on a one-to-one basis by U.S. dollars in cash reserves.

4. Binance Coin

Binance is the world’s largest cryptocurrency exchange–popular because of its low trading fees. Binance Coin (BNB) is the cryptocurrency “native” to the exchange, which means that it was designed specifically to be used in the Binance ecosystem. Binance Coin launched in 2017 with an ICO.

Binance tries to incentivize investors to use Binance Coin by allowing them to get a 25% discount on trading fees if they use BNB to pay for trades.

5. Cardano

While Cardano lacks some features, it’s considered by some market participants to be a work in progress and has potential to be a cheaper alternative to Ethereum in being a basis for DeFi and NFT projects.

A key feature of ADA is that it has a proof-of-stake blockchain. This means the complicated proof-of-work calculations and high electricity usage required for mining coins like Bitcoin aren’t necessary. Instead, all ADA coins are pre-mined. That could make Cardano appealing to investors who have been critical of the environmental costs of cryptocurrencies like Bitcoin.

6. Ripple

Ripple (XRP) was created to be used by existing banking institutions. Ripple network can process 1,500 transactions per second. Unlike Bitcoin and many other cryptocurrencies, XRP is not on a blockchain network. Instead, it’s based on what’s called a “hash tree.”

In 2020, the Securities and Exchange Commission sued Ripple and its executives for allegedly misleading investors in XRP by selling more than $1 billion of the virtual tokens without registering with the regulator.

7. USD Coin

USD Coin (USDC) is a stablecoin powered by Ethereum blockchain that is pegged to the U.S. dollar. After the stablecoin Tether came under regulatory trouble for how much it actually backs in reserves, Circle has said its reserves are evaluated and audited by Chicago-based accounting firm Grant Thornton LLP.

In March 2021, Visa announced that it would allow the use of USDC to settle transactions on its payment network–a sign of mainstream acceptance of the crypto market.

8. Dogecoin

Dogecoin had a meteoric rise in 2021, surging through the month of May. The cryptocurrency was started as a joke by its founders in 2013. One of Dogecoin’s most notable features is that it has a Shiba Inu dog on its symbol.

Dogecoin enjoyed popularity in a pattern similar to the way meme stocks did in 2020. Tesla CEO Elon Musk was an advocate of Dogecoin, touting it on social media. On June 1, cryptocurrency exchange Coinbase said it would accommodate Dogecoin, signalling more mainstream acceptance of the cryptocurrency.

9. Polkadot

Polkadot’s coin is called dot (DOT). Polkdot’s creator Gavin Wood is also the co-founder of Ethereum. He wrote the original white paper for Polkadot in 2016.

Central to Polkadot are “parachains” — blockchains that can run higher transaction throughput than Ethereum through design. “Parallel blockchains” — transactions that are spread across multiple computers, similar to parallel processing — have also been touted as having potential as an alternative to Ethereum.

10. Binance USD

Binance USD (BUSD) is a stablecoin that is issued by Binance, the world’s largest cryptocurrency exchange. It’s pegged to the U.S. dollar on a one-to-one basis. It runs on the Ethereum network so can be accepted everywhere for payments or loans where other ERC-20 tokens are.

The Takeaway

Cryptocurrencies can be purchased on major cryptocurrency exchanges or crypto trading platforms. While the digital-asset market is new, trendy and could be a growth opportunity, it’s important for investors to understand that it’s also highly speculative and that all the issues related to safety and security haven’t been worked out.

On SoFi Invest®, investors can trade cryptocurrencies with as little as $10. Their first purchase of $50 or greater will get them a bonus of up to $100 in bitcoin. See full terms at sofi.com/crypto. Cryptocurrencies like Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ethereum Classic can be traded 24/7. Plus, SoFi takes security seriously and uses a number of tools to keep investors’ crypto holdings secure.

Get started trading crypto on SoFi Invest today.

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SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

CRYPTOCURRENCY AND OTHER DIGITAL ASSETS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

Cryptocurrency and other digital assets are highly speculative, involve significant risk, and may result in the complete loss of value. Cryptocurrency and other digital assets are not deposits, are not insured by the FDIC or SIPC, are not bank guaranteed, and may lose value.

All cryptocurrency transactions, once submitted to the blockchain, are final and irreversible. SoFi is not responsible for any failure or delay in processing a transaction resulting from factors beyond its reasonable control, including blockchain network congestion, protocol or network operations, or incorrect address information. Availability of specific digital assets, features, and services is subject to change and may be limited by applicable law and regulation.

SoFi Crypto products and services are offered by SoFi Bank, N.A., a national bank regulated by the Office of the Comptroller of the Currency. SoFi Bank does not provide investment, tax, or legal advice. Please refer to the SoFi Crypto account agreement for additional terms and conditions.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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