Homeowners Insurance Liability Coverage Explained

Part of protecting your property with home 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 the insurance coverage that protects you in the event that you cause harm or damage, unintentionally, to another person and/or their possessions. Being found legally liable for an accident on the road or at your property can quickly stack up hundreds of thousands of dollars of medical bills and legal fees that you'd be responsible for paying. I'm guessing you probably don't just have $500,000 tucked under your mattress for a rainy day, and if you do, I'm willing to bet you'd much rather use that money elsewhere. No one ever plans on getting involved in an accident, but sadly, they still happen every day. 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.

I 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. Think with me here - What's the worst thing that could happen while you're behind the wheel of a car? Now what's the worst thing that could happen on your property if you had company over? Got it? Ok, that is what we need insurance coverage for. If you're found liable for someone's life being severely altered or ended, how do you plan on paying for that? We obviously hope that never happens, but we can't be certain. We can make sure that if it does, we at least won't be in financial ruin afterwards.

What does liability coverage on my homeowners insurance policy protect me for?

There's a long list of things that could happen at your property that you could be sued for. 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. We'll talk about some of the more common ones that my clients have encountered, but I hope you'll realize the need to make sure you're protected from anything.

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 can fill our hearts with love and our cameras with photos, but they are often the leading cause of liability claims. While I'm sure you've got the sweetest dog in the world that wouldn't hurt a fly, one look or movement that he/she doesn't like could result in some teeth being used. Cat owners – you're not in the clear either. Cat scratches that then get infected are also near the top of the list for liability claims.
• Pools: Few things in life are better than a summer day at the pool, however, the pool is probably the most dangerous part of your entire house. We're all aware of what could go wrong at a swimming pool, what you may not know is that you would also be found liable if a neighbor kid climbed your fence and drowned 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. Diving boards and slides can add to the excitement, but they also add to the risk.
• Trampolines: A great way to get some exercise and defy gravity, but the added danger is clear that high above the ground. A little bit of roughhousing on a trampoline or testing out a new gymnastics trick can quickly lead to a hospital visit. Don't forget that a nice gust of wind could quickly send your trampoline tumbling at the speed of a car 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. Maybe a chair snaps during Charades and your friend lands wrongly on his neck. Maybe your aunt cuts her finger badly with a knife while helping carve the Thanksgiving turkey. If your kids have their friends over to play sports in the yard, someone could get hurt. Have stairs at your house? A slip and a fall and you'll have to pay for medical bills and all.
• Passersby: Maybe the most common visitor to your home is the Amazon delivery guy. Well, if he's approaching your door to drop off the latest package and takes a hard fall on the porch, 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. I've even heard of a robber winning a lawsuit when he broke his leg tripping on some toys inside the house he was trying to rob.
• 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 can be sued for that. Perhaps you love golfing, but the ball doesn't always go where you want it to. If that errant drive hits someone on the head, you could be responsible for some costly bills.

After hearing these stories, you might be thinking, "None of these will never happen to me!" While I'm rooting for you to be right, we need to be ready if you're wrong. So 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. I always advise my 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 I 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 (link to umbrella article).

Could I get less coverage than this? Sure, but I never recommend it. To go from $500,000 in coverage to $300,000 will only ever save you a dollar or two a month so it doesn't make much sense. Remember, 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 gumballs 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. As a renter, just because you don't own the property does not mean you aren't responsible for what happens in your unit. If something goes wrong with the home/apartment itself, that's for the owners to worry about – but if someone gets hurt in your home/apartment, that responsibility falls back on you. 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 at it. I'd recommend considering $500,000 as the amount you choose for liability coverage on your Renter's policy too.

Article written by: Agent: Ben Dangerfield