When you purchase home insurance, there are typically two categories of insurance that you are purchasing: property coverage and liability coverage. Property coverage is related to the contents of your home, your belongings, and the building itself. Liability coverage is more complicated and homeowners often wonder how much liability coverage they need.
In this blog, the experts at Dumfries review the basics of liability insurance to help you better understand if $1 million is enough protection, or whether you might be advised to increase your limit.
What Is Liability Insurance?
Liability insurance provides you with protection against claims resulting from injuries and damage that you, your family, or your pets are found partially or wholly responsible for causing. It covers the legal costs and payouts, even if you are found not liable.
Do I Need Liability Insurance?
If you are a homeowner you should have liability coverage, and most insurance policies include it. Liability insurance is essentially coverage for alleged negligence on your part for incidents.
What Are Common Causes of Liability Claims?
The most common occurrences for liability claims are:
- Animal bites
- Accidents involving pools
- Falls resulting from loose carpet or items on the floor
- Injuries resulting from alcohol consumption
- Slips from icy surfaces
What Types of Coverage Are Associated with Liability Insurance?
We recommend that you refer to your specific policy wording for the details on all inclusions and exclusions. The list that follows is a high-level summary that is not intended to replace your policy’s wording.
Liability can be broken down into the following types of coverage:
- Legal or Personal Liability: Applies at your home or anywhere bodily injury or accidental damage was unintentionally caused by you to another person or their property.
- Premises Liability: A landowner or official resident of a property is responsible for an injury that occurs within the land or property.
- Tenants Legal Liability: Insurance for loss or damage of a property resulting from the action, or actions, of a person renting a space at that property.
- Defense Coverage: Liability insurance that covers the defense costs and the settlement or indemnity payments.
- Loss Settlement Amount: The funds that an insurance company pays out to a claimant in the event of an insurance claim.
- Supplementary Payments: Include first aid expenses, premiums for appeal bonds, judgment interest, and reasonable expenses incurred by the insured at the insurer’s request when assisting in the defense of a claim.
- Voluntary Medical Payments: Covers medical expenses in the year after an accident where a party is unintentionally or accidentally injured on your property, even if you are not legally liable.
- Voluntary Property Damage Payments: Covers the unintentional direct loss or damage you, caused to another person’s property, even if you are not legally liable.
How Much Liability Coverage Should I Have?
We advise that you should purchase as much liability coverage as you can afford to ensure that you protect your assets in the event of an accident. We are now seeing that most residential property owners purchase $2 million coverage. The difference in the premium amount between $1 million worth of coverage and $2 million in coverage is pennies a day.
Remember, if you are liable for injuries to another person resulting in a lawsuit, you will be responsible for any losses or payouts over and above the amount of coverage you have. This includes any interest that could be owed on the payment. The financial burden that could result from such a settlement may have long-term impacts on your family’s financial security.
Ask yourself, is your current coverage enough to give you peace of mind? If the worst-case scenario were to occur would you be put into a position of financial hardship? The team at Dumfries is here to help you protect your family and your home. Contact us if you have questions about your home insurance policy or liability coverage.