Homeowners liability insurance, like insurance generally, is
something that most people don’t think about until they need it. If you,
your family, or even your pets, injure another person or that person’s
property, you might face a lawsuit -- whether or not the injury is your
Homeowners liability insurance may cover your legal liability (up to
the policy limits) if the injury occurred on your property or away from
it. So, it is important to protect yourself from these lawsuits by
making sure your home is adequately insured by homeowners liability
Homeowners' Insurance Basics
Homeowner liability insurance is a type of insurance that indemnifies
owners of private homes against loss, damage, or liability to their
homes arising from an accident or other unknown event. Homeowner
liability insurance combines first party coverages and third party
- First Party Coverage. First party coverages protect
against personal loss or damage sustained by the insured (i.e., losses
of the home or its contents due to theft or fire).
- Third Party Coverage. Third party coverages protect against bodily injury and property damage based on the insured’s acts (i.e., a slip and fall accident). Homeowners liability insurance policies that protect against premises liability lawsuits are a type of third party coverage.
Types of Coverage
Homeowners liability insurance policies usually include third party coverages for the following claims:
- Medical payments to others. This form of liability
insurance pays for the medical expenses incurred by people for injuries
sustained in your home or property, without regard to the fault of the
injured person or you.
- Personal liability insurance. This form of
liability insurance provides coverage for personal liability for bodily
injury or property damage. This policy protects against accidents that
result in bodily injury, sickness, or disease (i.e., a guest slips in
the bathroom) or property loss or damage (i.e., your child hit a
baseball through the neighbor’s window). This type of coverage usually
covers the homeowner and his or her spouse, relatives, and other
household residents under their care.
- Residential employees insurance. Homeowners liability insurance may provide workers’ compensation and
employers’ liability coverages for employees of a house, such as maids,
nannies, and adult caregivers. This usually does not extend to repair
persons, such as a plumber or carpenter, because they are generally not
employees, but independent contractors.
- Umbrella policies. An umbrella policy is a type of
coverage that you purchase on top of another coverage. Essentially, it
provides you with additional coverage in excess of the underlying
coverage. However, before the umbrella policy comes into effect, the
underlying primary policy usually must be exhausted. So, if you have
purchased the umbrella policy from a different insurance company than
the primary policy, the primary insurance company has a duty to defend
you against lawsuits until the primary coverage is exhausted. Umbrella
policies may also provide coverage for losses not covered by the
underlying policy. In this situation, you would not need to exhaust the
How Much Coverage Should I Purchase?
Policies start at about $100,000 coverage, however, having at least
$300,000 worth of coverage is recommended by the Insurance Information
Institute. If, however, your net worth is more than that amount, then
you should also consider purchasing a $1 million umbrella policy for
The main thing to consider is that if a personal injury claim is
filed by a third party, it can get expensive, especially where serious
injuries result. You want to make sure that your policy limit is
reasonably high enough that you probably won't be personally on the hook
if a valid claim exceeds the policy ceiling.