The personal liability portion of your homeowners insurance policy covers you against lawsuits for injury or property damage that you or your family members cause to other people. It also pays for damage caused by your pets. The liability coverage in your standard homeowners policy pays both for the cost of defending you and for any damages a court rules you must pay. Unlike the other types of coverage in your policy, liability insurance doesn't have a deductible that you must pay for out-of-pocket before your insurance company begins paying losses.
Types of Coverage
Most standard homeowners policies provide a basic limit of liability of $300,000 for property damages or injuries, but this amount can be increased for additional premium. There is also medical payments coverage under most policies, which would reimburse you for basic medical bills incurred under a liability claim. The standard policy carries a limit of $1,000 or $5,000 and would, for example, pay medical expenses for a neighbor who was bit by your dog or sustained a minor injury on your property.
How Much Should I Buy?
You should buy enough liability coverage to protect your assets. We live in a litigious society and you need to consider what could be at stake if you had a claim or lawsuit filed against you when someone is injured on your property or if you, a family member or your pet is responsible for hurting someone or causing damage to someone else's property. If you own property and/or investments that are worth a great deal more than the limits of liability on your current policy, discuss umbrella coverage with your agent or company.
Umbrella Policies
In this day and age you don't need to be a millionaire to require an extra million dollars in liability coverage! Think about liability coverage as a safety net or extra liability insurance that starts paying losses after you've reached the limits of your basic policy. Umbrella is sold as a separate coverage. In fact, many insurance companies won't sell you an umbrella policy unless you already carry a certain amount of basic liability coverage-generally $300,000 of underlying coverage on your homeowners insurance policy and $250,000 of underlying coverage on your auto insurance policy. Many companies also require that you insure both your home and car(s) with them before they'll sell you an umbrella.
Cost of Umbrella Coverage
The cost of umbrella coverage depends on how much liability coverage you carry on your basic homeowners policy, often referred to as "underlying coverage." The kind of risk you represent will also be weighed into the cost of the policy. Generally speaking, you can purchase a $1,000,000 umbrella policy for as little as $150 to $300 a year extra in premium. You will pay less if your chances of being sued are fairly slim. For example, you'll pay less if you only own one home or are a low risk driver. On the other hand, if you own a house, a lake cabin, along with a ski boat and a snowmobile, you'll pay for having considerably more exposure to risk.
FAQs
Determine how much liability insurance you need
What is the liability coverage of a homeowners policy? ›
Liability protection
Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets.
What is the most common cause of liability claims on a homeowners policy? ›
Almost 98% of home insurance claims are for property damage, according to the Insurance Information Institute (III) annual study into the causes of home insurance losses.
What is the 80 20 rule for home insurance? ›
This rule suggests you should insure your home for at least 80% of its total replacement cost to avoid penalties for being underinsured.
How do you explain liability coverage? ›
Liability insurance coverage protects you financially if you're responsible for someone else's injuries or property damage. Liability coverage comes standard with most vehicle and property insurance policies, including auto and homeowners insurance.
Why is homeowners liability coverage important? ›
Personal liability coverage provides financial protection if the homeowner is found legally responsible for injuries or damages suffered by others. Medical payments coverage covers medical expenses for individuals injured on the property, regardless of whether the homeowner is deemed legally responsible.
What does Section 2 of a homeowners policy would not provide liability coverage for? ›
Section II traditionally covers bodily injury and property damage but not other personal injury claims, as you might assume. For example, your homeowners' policy won't cover claims for libel or slander. However, you might be able to add a personal injury endorsem*nt that would.
What are two types of damage not typically covered by a person's homeowners insurance policy? ›
Homeowners insurance doesn't cover floods, earthquakes, typical wear and tear, and damage due to insufficient maintenance. You can usually add flood and earthquake coverage to your policy for an additional fee, but wear and tear and damage from a lack of maintenance are considered preventable.
What is the most common liability coverage? ›
The most commonly required liability limits are $25,000/$50,000/$25,000, which mean: $25,000 in bodily injury per person. $50,000 in total bodily injury per accident.
What is the most expensive homeowners insurance claim? ›
Damage Claims
There are many perils that can result in property damage. Oftentimes, these types of claims are very expensive. For instance, fire damage claims are the most expensive, resulting in an average premium increase of $273. Water damage claims are also very costly, increasing premiums by an average of $228.
Most homeowners insurance policies provide a minimum of $100,000 worth of liability insurance, but higher amounts are available and, increasingly, it is recommended that homeowners consider purchasing at least $300,000 to $500,000 worth of liability coverage.
How many quotes should you get for homeowners insurance? ›
How many quotes should I get for homeowners insurance? We recommend getting quotes from at least three home insurance providers. This will give you a broader comparison of coverage options and rates.
What is the rule 15 in insurance? ›
Public Law 15 (McCarran Act) is a congressional act of 1945 exempting insurance from federal antitrust laws to the extent that the individual states regulate the industry.
What is the limit of liability coverage? ›
Personal liability limits
You may be able to choose your personal liability coverage limit; often the three choices are $100,000, $300,000, or $500,000. Your limit typically applies to covered damages that you're legally liable for. Get tips for figuring out how much homeowners insurance you need.
Should you have liability or full coverage? ›
Typically, it's advisable to purchase full-coverage car insurance. Liability insurance won't pay for damages to your own vehicle after an accident for which you're at fault. It also won't cover damages due to theft, vandalism or acts of nature.
Which of the following is not a factor affecting home insurance prices? ›
Final answer: The value of personal property does not typically affect homeowner's insurance premiums unless additional coverage for valuable items is purchased. Important factors that do affect premiums include the home's location, construction type, and the limits of liability chosen.
What coverage under a homeowners policy would cover? ›
Well, homeowners insurance helps protect you, your home and your belongings from all sorts of unexpected events. And with a standard policy you'll get four key types of coverage: dwelling, other structures, personal property and liability.
Which of the following would be covered by an HO policy? ›
Generally, a homeowners insurance policy includes at least six different coverage parts. The names of the parts may vary by insurance company, but they typically are referred to as Dwelling, Other Structures, Personal Property, Loss of Use, Personal Liability and Medical Payments coverages.
What are the additional coverages in the liability section? ›
Explanation: The additional coverage in the liability section of a homeowners policy typically covers incidents such as property damage caused by the insured, bodily injury to others caused by the insured, and legal defense costs for covered claims. However, it does not cover damage to the insured's personal property.
Does homeowners insurance protect a homeowner against injury to other people on his property? ›
Personal liability coverage on your homeowners insurance policy may help pay for injuries and legal fees that result from an injury to another party on your property if you're liable.
