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Let’s say your dog bites the mailman or your tree falls on the neighbor’s car, and you get sued. Your first instinct may not be to look to your homeowner’s insurance for relief, but it should be among your first thoughts. Personal liability coverage for home insurance can cover the cost of litigation in these situations and more.
When does liability coverage for home insurance kick in?
Personal liability coverage protects your current and future assets in situations where litigation arises due to your family’s actions, property, or pets causing harm to another person’s body or property.
As this encompasses a broad range of possibilities, here are some examples of when you can look to your personal liability coverage under homeowner’s insurance for relief:
- You accidentally damage another’s property
- Harm befalls someone on your property
- Your pet or family member harms another person or their property
In such situations, your homeowner’s insurance can cover the cost of your lawyer and any settlement you are ordered to pay, up to the limit on your personal liability coverage. I’s important to note that, while family members and pets can benefit from the coverage portion of your homeowner’s policy, they must be explicitly listed on the policy for protection.
According to the National Association of Insurance Commissioners, damage or bodily injury occurring in motor vehicles is excluded from protection under personal liability coverage for home insurance.
Selecting limits of liability insurance
It’s not unusual for a homeowner’s policy to include a $100,000 limit on personal liability coverage. If your assets total that much or less, then that’s sufficient coverage. In thinking about your assets, be sure to include all of your property and investments in an estimation of net worth.
If the value of your assets exceed the standard limit of personal liability coverage on your homeowner’s policy, the limit can be raised. This, of course, raises premiums a tad, but the increase is likely smaller than you would guess. Increasing liability limits by $500,000, while varying by insurance carrier, rarely adds more than $50 to the annual premium. If you were to find yourself in court over a dog bite or fallen tree with everything you own at stake, the extra premium would be money well spent.
Optional umbrella coverage for home insurance
There’s often a ceiling on how much personal liability coverage you can carry. If you need more than the highest possible limit on liability coverage for home insurance to protect all of your assets, consider purchasing additional umbrella coverage. This is separate from your homeowner’s policy, but a personal umbrella liability policy can supplement your homeowner’s insurance by kicking in where home insurance liability ends.
This extra umbrella insurance is pricier than the built-in personal liability coverage to your home insurance, but you could rest easier knowing your assets have full protection. The amount of the premium is variable by provider and level of risk. Essentially, if you are deemed as low-risk to file a claim, you pay less. If you are deemed high-risk or have previously filed a personal liability claim, you pay more for protection.
The ability to purchase this additional insurance is usually dependent on already having a set amount of personal liability coverage. You may also be required to have certain limits on your automobile insurance policy.