In the first writing class I attended, the instructor passed around an assortment of glossy magazines and had us tear out photos of two protagonists and one antagonist. "These," she said, "were the main characters of the story each of us was going to plot." I made my selections, cut and pasted well, considering how long I'd been out of grade school, and developed my first story arc. The models had no life story, so I was safe from a close encounter with a defamation of character suit.
I have based settings and character's actions on personal experience. I live on a farm, hence my comfort with my farm-ranch setting. I've woven other dynamics of my childhood and motherhood into characters' POV. I confess I've incorporated personal intimate moments into some sex scenes. I don't think I've cut and pasted any living person onto a page.
I wonder if the type of story makes a difference. Memoirs could be risky.