What Every Homeowner Needs to Know About Insurance & Liability

Even a small slip-up can cost hundreds of thousands in medical bills and legal fees.
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Homeowners insurance, including buildings and contents protection, is usually required by mortgage lenders to protect their investment in your property. The third key component of a standard policy, though, is one of the most critical for you. Home liability coverage protects you when someone is injured while on your premises. It also covers accidental damage to their property, such as an automobile parked in your driveway.

More is Better

The standard benefit level on homeowners liability coverage often isn't enough. Typical policies usually include $100,000 to $300,000 of liability benefits. If someone falls in your house and suffers a serious injury with an extended hospital stay, $300,000 may not cover all the legal fees and medical expenses. You can request higher benefits and pay additional premiums, or even get a separate personal liability policy for around $5 million at a premium of $200 to $300 per year in many cases.


Generally, if someone is injured or their property, such as a car, sustains damage while they are on your property, your lawyers will either work out a settlement or the injured party will take you to court. Your benefits normally cover your legal expenses plus whatever the court rules that you owe in damages. If your obligation is $1 million and you have $300,000 in benefits, you have responsibility for the remaining $700,000. Without other liability coverage or the means to pay, you can face seizure of assets or years worth of wage garnishment.

Risk Factors

Just owning a home means you take on liability risks worth having insurance. Certain property features increase your liability risks and -- typically -- your insurance premiums. Pools, jungle gyms and trampolines are common hazards, according to a January 2010 HouseLogic website article. Pets can also add to the risk, based on potential falls, biting incidents or allergic reactions. Any of these factors justify higher levels of protection.

Guest Status

One thing homeowners are often surprised to learn is that they actually have some potential liability even when trespassers enter your premises. With any person on your property, you face liability if your willful action causes injury. Also, with trespassers and uninvited guests such as service workers, you have a duty to inform them of any dangers or safety risks on the property, according to a March 2008 FindLaw article. Your liability risks are naturally highest with invited guests, to whom you owe extraordinary effort to provide protection for known safety hazards on your property.

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