Keys to Understanding Homeowners’ Insurance Policies 

JUNE 6, 2023

Part 2: Liability Coverage

A homeowner’s policy has multiple parts, one of which provides liability coverage. This protects the homeowner against lawsuits for injury or property damage, court costs, and damages awarded. Some policies also pay for damage caused by pets.

Varying levels of liability coverage are offered in a homeowner’s policy. Most policies provide a minimum of $100,000, while higher coverage limits are available and range from $300,000 to $1 million. Placing higher coverage limits usually increases the premium nominally.

Why Do I Need Liability Coverage on a House?

There are inherent risks associated with owning a home. Many unexpected things can go wrong, such as:

  • Visitors to your home, or even people biking, jogging, or walking in front of your home could fall, causing injury.
  • Fire that starts in your home could spread and damage your neighbor’s property.
  • Swimming pools are a leading cause of injury and accidental death.
  • Your dog could bite and injure a neighbor or delivery person.

The list of exposures homeowners face goes on and on. Liability coverage protects your assets in the event you are sued. If you own property and have investments or savings that exceed the liability limits on your homeowner’s policy, consider purchasing a separate excess liability or umbrella policy. The amount of coverage should not only cover current assets but future earnings as well.

Who Is Covered?

The homeowner’s policy usually covers anyone living in your home or on your property. Children, relatives, spouses, and full-time students under 21 who are away at school are all covered.

Be cautious when renting a room to a non-relative as your liability policy may not extend to cover them. Further, it may be advisable for the tenant to obtain a renter’s policy so they have their own liability coverage in addition to coverage for their belongings. If someone moves into the home and is not related to you, speak to an insurance professional for guidance.

What About the Dog?

One of the most common liability claims for homeowners involves injuries caused by dogs. According to the Insurance Information Institute, injuries related to dog bites and attacks constitute one-third of all homeowners’ insurance claims.1 Consider the following statistics:

  • Homeowners’ insurance carriers paid out $1.136 million in liability claims related to dog bites and other dog-related injuries in 2022.
  • From 2013 to 2022, the average cost per claim nationally has risen by 131.7%. This is due to increased medical expenses as well as the size of settlements, judgments, and jury awards given to plaintiffs.

Most dog breeds are covered by a homeowner’s policy. However, there are exceptions, including:

  • Akitas
  • Alaskan malamutes
  • Any wolf breeds
  • Chow chows
  • Doberman pinschers
  • German shepherds
  • Great Danes
  • Pit bulls
  • Presa Canarios
  • Rottweilers
  • Siberian huskies
  • Staffordshire terriers

Muscular dogs with thick chests are usually excluded from homeowners’ insurance policies. However, there are some insurers that cover any breed of dog if there is no bite history.2 It is also recommended to have an umbrella or excess liability policy in place if you own a dog, regardless of the breed.

Guest Medical Coverage

This coverage helps pay for medical expenses if one of your guests is accidentally injured on or around your property. Claims such as emergency room visits, X-rays, and surgical procedures are typically covered. Guest medical is different from liability coverage. A guest does not need to take legal action against you to be afforded coverage under guest medical benefits.  

Are There Liability Exclusions in My Homeowner’s Policy?

The liability coverage afforded in a homeowner’s policy is broad, but there are standard exclusions that usually center around the following:

  • Losses related to business operations
  • Incidents arising from the use or maintenance of a motor vehicle
  • Injury to a relative that resides at the property
  • Flood damage

It is important to understand what coverage is included with your policy. If you have questions, call your insurance professional.

I Have Been Served With a Lawsuit — Now What?

A homeowner’s insurance policy outlines contractual responsibilities in the event of a loss. However, there may be times when you are unaware that a loss occurred until you are served with a lawsuit. For example, someone tripped on your steps when you were not home and broke an arm, or your child took the dog for a walk and the dog nipped someone, but no one told you.

If you are served with a lawsuit, do the following:

  • Contact/notify your broker or insurer of the event.
  • Send documentation collected at the time of the event to your broker or insurance carrier.
  • Forward copies of all legal documents received (Complaints, Summons, etc.) to your broker or insurance carrier.

Policies typically state that policyholders are required to give reasonable notice to the insurance carrier in the event of a loss. This means that notification must be timely. You also have a duty to assist the insurance company with the claim. For example, if the carrier wants to examine the property, you must give them access. If coverage applies, the insurance carrier will typically pay for the cost of investigation, legal expenses, and emergency service if needed.