3 Types of Liability Coverage on a Homeowner’s PolicyJune 7, 2018
Liability coverage is an important part of your insurance portfolio. In fact, it is arguably the most important part. Why? Because Liability claims and payments are hard to predict or measure. The act of buying Liability Insurance provides you with payments from your insurance company for the cost of your legal defense. This is available even if the claim by the third party is of frivolous nature. That, by itself, makes the relatively low cost of Liability coverage an incredibly worthwhile purchase. But, it is also important to make sure that you have the right coverages, and enough of it. On a typical Homeowners policy, you may find three common types of Liability coverage. Some are built into the policy while others usually need to be added by endorsement. Let’s take a look at each one:
1. Premises Liability
Premises Liability Coverage protects you from claims arising on your property as a result of your negligence. For example, if you have a trampoline without a net and the neighbor’s kids are over to play with your children and one of them falls off the trampoline and breaks a leg, the bodily injury resulting from that occurrence will be payable via the Premises Liability Coverage on your Homeowners insurance policy.
Your failure to provide a safety net around the trampoline hazard resulted in an injury and so you would likely be deemed negligent by the courts and therefore responsible to pay if the injured party were to seek restitution for their damages. This is the reason why many insurance companies do not like to insure properties with hazards like trampolines or swimming pools.
2. Personal Liability
Personal Liability Coverage provides you with liability protection for claims brought against you for damages resulting from your own negligent acts. A good example of a personal liability situation would be a circumstance in which you are walking your dog and it bites another pedestrian. This didn’t happen on your premises, but your personal liability insurance is “attached” to you, the insured, not your property.
But, does homeowners insurance cover dogs? Insurance companies want to know what kind of dog(s) you own so that they can better measure the Personal Liability exposures that are present in your life. For this reason, some companies have long “dog exclusion” lists. If you own a dog breed that is on such a list, you may be ineligible for some companies’ Homeowner’s Insurance Programs. Other companies may have (inadequate) sub-limits of Liability Insurance for dog bites, or exclude dog bites from the Liability coverage form completely. This presents a potential gap in coverage that you need to be very aware of!
Personal Liability also needs to cover everyone who is considered an insured on your homeowner’s policy. If you’ve had one of your children move back in, parents move in, another family member, etc., you may need to update your home insurance to make sure you have enough coverage. This is one of the home insurance considerations for multigenerational households.
3. Personal Injury
“Personal Injury” sounds like it would already be covered by Premises Liability or Personal Liability Insurance, but it is its own kind of Liability coverage. It’s also another one of the most important types of Liability coverage. This coverage is often added to a Homeowner’s Insurance policy via a coverage endorsement.
Often, it is conveniently packaged with other useful coverages into an endorsement that may be marketed as an “enhancement package”. It is a cheap coverage to add, and in the age of so much written online communication, most Homeowners shouldn’t be without it.
This coverage provides you and your family members with coverage against claims of libel, slander, invasion of privacy, and several other wrongdoings. If you leave a scathing online review, or start a petition against a business owner who you feel wronged you, they may try to claim libel and bring a Personal Injury suit against you. Your insurance company would pay your legal defense to fight these claims, (and pay the claimant if you were found to be at fault), if you purchased Personal Injury Coverage via your Homeowner’s Insurance Policy.
Liability Insurance is typically the cheapest part of a Homeowner’s policy. However, it is foolish to underestimate the importance of having the appropriate types of liability coverage and the appropriate amounts. Talk to an Insurance Agent about the Liability coverage(s) available and make sure you openly discuss all of the potential Liability exposures present within your own individual circumstances. It is important that you know exactly what is covered, and what is excluded, on an insurance policy so that you can make educated decisions about obtaining the kind of comprehensive insurance coverage that will help protect your lifestyle and assets from 3rd party claims.
Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.