How You Benefit From Homeowners Liability Coverage

You buy homeowners’ insurance to protect your home and your personal property. But many people don’t realize their homeowners’ policy also protects them from liability lawsuits and claims.

In 2010, the average paid liability claim against a homeowner cost $18,351, according to an ISO study of homeowners multiperil policies. Some claims, however, cost much more.

In addition to covering the structure of your home and its contents from loss, damage or theft, a principal feature of your policy is homeowners liability coverage, covering you for personal liability.

What exactly does this mean? The personal liability portion of your homeowners policy will pay costs you become legally obligated to pay if a third party (someone outside your immediate family) is injured on your property, or if you or an insured family member injure another person or damage his or her property. Your policy will pay the cost of treating injuries or repairing property damage, plus your related legal costs. This is important, because even a frivolous lawsuit is expensive to defend.

Your coverage applies not just at home, but anywhere in the world. It insures you for these specific instances:

Negligence

Your policy pays for bodily injury and property damage when you have been negligent, and that negligence causes another person to become injured or suffer property loss or damage. If your sidewalk is broken and uneven and your neighbor trips and breaks his leg, you have been negligent, and your policy would cover the cost of your neighbor’s claim. But if you maintained your sidewalk perfectly and your neighbor fell and injured himself, you haven’t been negligent, and your neighbor would not have a claim. He could file a lawsuit, but probably would lose.

Medical payments

Fortunately, your homeowners’ policy has one additional feature: The medical payments portion will cover an injured third party’s relatively small medical expenses, regardless of whether or not you were at fault. It should pay your neighbor’s medical bills if a minor accident occurred on your property.. This coverage offers advantages for everyone, including the insurance company, since it reduces the likelihood of a costly lawsuit. Policies have explicit limits on medical payments, ranging from $1,000-$5,000 per person.

Exclusions

Homeowners policies exclude liability coverage for any accidents relating to the use of a car, truck or motorcycle. (Your personal auto/motorcycle policy covers this exposure.) Policies also exclude coverage for liability arising from “business pursuits.” If you own a business, even if you operate it out of your home, you will need a business liability or business package policy to cover this exposure.

Your liability coverage also does not apply to damages or injuries caused by intentional acts. Thus, if, due to your negligence, your fence, falls and damages your neighbor’s landscaping, your policy would likely cover your costs of repairs. On the other hand, if you chop a tree down and it falls on the neighbor’s roof, your policy would probably not cover that claim.

In some states, homeowners policies will cover the intentional acts of the minor child of a policyholder. This coverage stems from the principle of “vicarious parental liability,” which holds a parent responsible for a child’s actions. Homeowners’ policies in some states include coverage for vicarious parental liability, but with low limits—for example, $3,000.

Homeowners policies also exclude coverage for libel and slander, or the communication of false information that can harm a person’s or group’s reputation. The communication may be spoken (slander) or written or otherwise recorded (libel).

Many insurance companies also exclude coverage for dog bites. Some will even refuse to insure homeowners who own “vicious breeds.” The “vicious breed” list varies from insurer to insurer, and even year to year. If you own a dog, we can help you evaluate your liability coverage needs, particularly if you have a guard dog or one with a history of biting people or attacking other people’s pets.

Adding More Coverage

Typical homeowners policies have liability limits that range from $100,000-$300,000. Policies for higher-end homes might have higher limits, but seldom more than $1 million. High net worth or prominent individuals are more frequent targets of lawsuits than others. If you have only the standard liability limits, they might not be enough to protect your assets from a lawsuit over a serious injury. You can buy a personal liability umbrella policy, a separate policy that increases the liability limits of both your homeowners and auto policies. Umbrellas can increase your liability coverage to $1 million or more for very little extra expense.

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