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Home liability insurance: What does it cover?

One of the most important components of a homeowners, condo or renters insurance policy is the personal liability section. This coverage provides protection for accidents you are liable for that occur inside or outside your home and result in bodily injury or property damage.

Basically, your homeowner insurance personal liability is there to protect your assets in the event someone is injured in your home or due to a mistake or accident that you cause. It can be a financial lifesaver as medical costs can quickly spiral out of control and in our litigious society there is a good chance you will end up being sued.

In this article we will look at the various types of personal liability, recommended coverage limits, the types of incidents that are covered as well as review some expert tips.

Here is everything you need to know about personal liability insurance.

What is personal liability insurance?

Personal liability insurance is a component of a homeowners (all types) or renters insurance policy. Liability will cover the cost of damages that you or other people covered by your insurance policy are responsible for causing.

The personal liability portion of your policy will also cover the cost of defending a lawsuit if you are sued as well as any resulting judgments coming out of the lawsuit, up to your policy limits. Its main purpose is to protect your assets in the event of an unexpected event for which you are considered liable.

Personal liability insurance comes in a couple of different types:

Bodily injury: This type of liability insurance covers your legal responsibility when someone that is injured in or around your home. An example would be someone falling down the stairs in your home or slipping on an icy sidewalk.

Bodily injury liability works in conjunction with medical payments (sometimes called guest medical) portion of your homeowners policy.  Medical payments helps pay for reasonable and necessary medical expenses of non-residents who are accidentally injured on or around your property.  Your personal liability covers when there are claims of negligence that caused the injury or a lawsuit filed due to the incident.

Guest medical typically covers (up to your limit):

  • Necessary medical and surgical expenses
  • Dental work
  • Ambulance
  • Hospital costs
  • X-rays
  • Professional nursing services
  • Prosthetic devices
  • Funeral services

Property damage: This liability type will cover the cost of damage you do to someone else's property. As example, your child throws a baseball through the neighbor's window and it damages an expensive piece of art. Property damage would pay for both the window and the art piece, up to policy limits.

Coverage limits of personal liability

Personal liability coverage limits are important and you should set them carefully. Here are a few things you need to know about liability limits:

The majority of homeowner policies come with $100,000 in personal liability insurance but this is rarely enough coverage. If a serious fall or injury were to happen in your home, medical expenses, to say nothing of the cost of a lawsuit, would quickly eat up this amount of protection. Most experts recommend upping your limits to at least $300,000.  The medical payments portion has its own limits as well.  The amount of medical payment coverage you can purchase varies by insurer but at least $5,000 is recommended.

What and who is covered by personal liability insurance?

When it comes to covered parties, usually anyone that is considered a family member and lives in your home would be covered by your policy. This includes your spouse, children, aging parents that live with you as well as employees that work in your home such as child care providers.

It is important to note that tenants are not covered, so if you rent out a portion of your home, your tenants will need their own renter's insurance policy to be protected.

Personal liability insurance covers a wide variety of situations,.Here are a few of the most common claims as well as a few unexpected claims that would also be covered:

Dog bites: This is a big one. According to the Insurance Information Institute, dog bite claims on homeowners insurance policies cost roughly $400 million a year and they account for over one-third of all home insurance liability claims.

Slips and falls: A trip down the stairs or a fall on a slippery sidewalk can not only result in costly medical bills, but a lawsuit is also a possibility.

Neighborhood damage: A baseball through a neighbor's window or a rock thrown by a lawn mower that damages your neighbor's house or car are all covered.

Here are a few uncommon occurrences that are also covered:

Libel and Slander: Most, but not all, homeowner policies offer defamation of character coverage, which will cover you if you are accused of libel or slander . . There are exclusions so be sure to check your policy for details.

Food poisoning: If your  cooking at the holiday party makes your guests ill,, your homeowners policy should cover the medical bills and possibly any resulting lawsuits. There are restrictions on most policies so check the wording of your policy.

Outside the home: Your homeowners policy may also cover accidents outside the home. If you manage to damage a hotel lobby or hit someone with a golf ball you shank off the tee, your homeowners policy should step up to cover the damages.

Any intentional acts are not covered. As an example, if you push someone down your staircase you will be on your own for all bills associated with the incident.

What is not covered?

Homeowners, condo and renters insurance has exclusions, namely being that household members cannot claim against the coverage.  For instance, the household exclusion would keep a resident of the home from making a medical claim for slipping on their own icy front porch.  Instead, the injured party would need to place a claim with their own health insurance provider for the resulting medical bills.

Also, vehicles of your home are not covered under either the personal property or liability portion of a home insurance policy.  So, while a neighbor can make a claim if your child throws a baseball and it breaks a window of their vehicle, if it happens to your vehicle, you cannot under your home policy.  You could make a claim under your car insurance policy’s comprehensive coverage.

Each home policy has its own specific list of exclusions, so read over your policy in its entirety to find what yours are.

Is personal liability insurance required?

When it comes to homeowners insurance, liability is not technically required, but it's very difficult to find a policy that doesn't include some liability coverage. "While it's possible to get a homeowner policy without a liability component, it wouldn't necessarily be cheaper as these days insurance is sold as a package," says David Meltzer, founder of the East Insurance Group.

If you have a mortgage on your home, your lender will absolutely require that you have a homeowners policy on it  to protect its asset. And since it is actually more work (and not necessarily cheaper) to get a policy without liability coverage, industry experts recommend buying a standard policy.

As with a home, a condo (as long as you have a mortgage) requires a homeowners policy and it's very difficult (and a bad idea) to exclude the liability portion of the policy. It is also possible that your condo association will require a certain amount of liability coverage. Check your condo association documents for details.  Typically, the condo association has its own liability policy in place that will cover outdoor and common areas, but you are responsible for someone’s injury or property damage within your home (or outside your home and off the condo premises).

Apartments, however, differ. Since you do not own the unit, you are not required to carry a renters policy. However, renters insurance is extremely affordable and will not only replace your belongings if your apartment is burgled, it also offers liability coverage in the event someone is injured in your apartment.

Home, condo and renter policies vary but most come with $100,000 in liability coverage with the option to increase that amount up to $300,000 or more.

Umbrella policies can protect your assets once liability is maxed out

An umbrella policy is a liability insurance policy that supplements the personal liability portion of your home, condo or renters policy. A high-figure judgment against you due to a lawsuit could result in you having to sell your home, and liquidate other assets-- including retirement funds or a child's college fund -- to settle a claim that exceeds your policy limits. Basically, if you lose a lawsuit, all of your assets are at risk, which is why umbrella policies play a critical role in ensuring you have adequate protection.

The great thing about umbrella policies is that they are very affordable for the amount of coverage they offer. While costs will vary depending on your personal circumstances, expect to pay around $150-$200 for $1 million in coverage. Umbrellas are usually sold in $1 million increments up to $5 million.

Many insurance companies require that you already have a certain amount of liability car and home insurance in place before selling you an umbrella policy. These limits typically are at least $250,000 worth of liability car insurance to pay for injuries to others you cause in an accident, and $500,000 worth of liability car insurance  to pay medical bills for any one accident you cause. Generally, you must also have at least $300,000 in liability coverage for your home.  Check with your insurance company regarding its umbrella requirements.

A little expert advice for buying personal liability insurance

Personal liability is an absolute necessity, as you never know when an accident or error in judgment can have a major impact on your life. "Liability insurance is essentially asset protection," says Thomas J. Simeone with Simeone & Miller in Washington D.C.

A mistake or accident can quickly put all of your assets at risk if you are not properly insured.  And, if you think it won’t happen to you, think again.

"In one case, we collected $100,000 from a homeowners policy when a woman negligently rode her bike through a cross walk and injured our client, who was a pedestrian,” says Simeone. “ And in another, we settled for $300,000 where a woman was walking her dog and it bit the ear of a child."

Here are a few tips from some industry experts regarding personal liability coverage:

Up your limits: The liability coverage provided by a standard homeowners, renters or condo policy is never enough. "Do not skimp on insurance, especially if you have significant assets. People with high income should not only purchase the highest level of liability insurance available, usually $300,000 - $500,000, they should also purchase an umbrella policy," advises Simeone.

Hussain Al-Mutawakil with Sahouri Insurance agrees. "We always recommend that the minimum to carry is at least $500,000 combined single limit or $1 million when the carrier offers it,” he says “We sometimes also recommend an umbrella policy as well."

Consider an umbrella: All of our experts recommend adding an umbrella policy to your insurance portfolio.

"We usually recommend umbrella policies as they are usually inexpensive and, given the verdicts that can be handed down, can provide crucial protection if you or a family member is found at fault in a number of accidental situations," says Travis Biggert with Hub International

An umbrella policy will also protect you in the case of accidents caused by an older child who is still financially dependent on you but not living at home, says Meltzer.. "

Now it's time to break out your homeowners policy and check your personal liability limits. If they are too low, contact your agent to make sure your assets are completely protected.

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