Part of protecting your property or rental with insurance is protecting what can happen to others at your home. Make sure you understand your liability coverage and have the right amount on your policy.

What is liability insurance?

Liability insurance is coverage that protects you in the event you cause harm or damage, unintentionally, to another person and/or their possessions. Being found legally liable for an accident can quickly turn into hundreds of thousands of dollars of medical bills and legal fees that you’d be responsible for paying. Most people don’t have $500,000 tucked under their mattress for a rainy day, since no one ever plans on getting involved in an accident. Having proper insurance coverage for your individual possessions is incredibly important, but the protection of your entire portfolio of assets can be at risk with a liability claim.

We like to call liability insurance “Worst Case Scenario Coverage.” It’s smart to have financial safeguards in place for the predictable expenses that may arise in life, but it’s even wiser to be ready for the unexpected.

What does liability coverage on my insurance policy protect me from?

There’s a long list of potential lawsuits that could happen at your home. You can’t use your liability coverage if a resident of your home is the one injured, but it extends to those visiting your home: guests, strangers, and even intruders alike.

THE BIG 3

The following three examples can bring a lot of joy to our lives, but they also come with additional risk. Make sure you talk with your agent about having the correct coverage for these liability exposures:

Pets

Dogs and cats are often the leading cause of liability claims. Even if you have a normally docile animal that is trying to protect your home, if they bite or scratch a stranger or intruder, you could still be facing a lawsuit.

Pools

There are several scenarios that could result in injury at a swimming pool. However, you could also be found liable if a neighbor’s kid climbed your fence and was injured in your pool. The lawyers won’t care if you extended the invitation to take a dip or not, they only care that it happened on your property.

Trampolines

Trampolines can get dangerous quickly, leading to injury and lawsuits. Additionally, a storm could send your trampoline tumbling into your neighbor’s house. You’d be responsible for that damage too.

Other examples of liability exposures in your home

Hosting Guests

Any friends you have over for a game night or family that gathers to celebrate the holiday could sue you if something goes wrong on your property.

Passersby

A stranger or delivery driver could take a hard fall on the porch, and you would be liable for it. Even someone who gets hurt simply walking across your sidewalk could sue you since it happened on your property.

Off-Premises

When we leave the safety of our own homes to do something fun, we take some extra risk. Thankfully, your home insurance liability coverage can also cover you when you leave your property. If you’re skiing in the mountains and accidentally take someone else out, you could be responsible for some costly bills.

After hearing these stories, you might be thinking, “None of these will never happen to me!” Many things in life are out of your control; thankfully, selecting the proper amount of liability coverage is in your control.

How much liability coverage do I need on my homeowner's insurance policy?

You need to have as much liability coverage as you can afford. Thankfully, it comes standard on most property insurance policies. We encourage clients to select $500,000 in coverage on their policies to make sure they’re properly protected. With most policies, that means you’ll have $500,000 “per occurrence” or per accident, not just total for one policy year.

Could you get more coverage than that? Absolutely. Some insurance providers allow for more on their home policies and some can set you up with an additional $1,000,000 or more in liability coverage via an umbrella policy.

Could you get less coverage? Yes, but the savings are minimal compared to the risk. To go from $500,000 in coverage to $300,000 will only ever save you a dollar or two a month, and the point of this coverage is to protect against the unexpected.

I don’t think I could be sued for $500k

If you don’t have $500,000, you still need at least $500,000 in liability coverage. You don’t have to be a millionaire to be sued like one. When sorting out liability claims, the lawyers aren’t interested in how much money you have – they’re deciding how much money you owe. If what you owe is more than what you have, there are still ways for them to get that money from you. In many states, your future wages could be garnished. There’s also a possibility you’re prevented from buying/selling your home until you’ve paid the entirety of the claim. For the cost of a few dollars a month, you can make sure none of this ever happens to you.

Do I need liability insurance if I’m renting?

You absolutely should have liability coverage if you’re a renter. No matter where you live, whether you own the property or not, people can still get hurt there and you could still be found liable for it. It’s common for apartment complexes or landlords to require their tenants have renter’s insurance for this very reason. They aren’t concerned with your personal contents in your home, they’re worried about what liability issues could happen in it. We recommend considering $500,000 as the amount you choose for liability coverage on your renter’s policy too.

By ensuring you have adequate liability coverage, you protect yourself and others who may enter your home. Have a thorough conversation with your agent about your policy to make sure you have the best coverage.