Basic homeowners insurance will repair fire damage, but unless you have liability insurance, you're on your own when a neighbor slips and falls on your patio. While it has its exceptions and limitations, homeowner's insurance is the best way to protect yourself against the financial fallout of a major lawsuit.
Liability insurance will protect you if your negligence results in someone getting hurt in your home or on your property. It also offers some limited coverage for damage that you do to someone else's property. When choosing a homeowner's liability insurance policy, make sure that it provides enough coverage. Some policies may only pay out a maximum of $100,000 or so, which may not cover the cost of a major lawsuit. Your insurance agent can help you find a policy with a higher limit.
Children and Pets
Your liability coverage usually extends to injuries caused by a pet or one of your children. The policy may also cover damage, even intentional damage, done to another person's property by your child who is under age 13 at the time of the incident.
Talk to your insurance agent about umbrella coverage. Umbrella coverage is a policy that you can add on to your existing home and auto insurance that provides high levels of coverage in case of a serious serious accident. It typically has a high deductible, and premiums can be as low as several hundred dollars per year.
If you run a home business, or do business out of your home, you'll need to either get a rider onto your existing homeowner's liability policy or get a separate liability policy for your business. Your regular liability insurance won't cover accidents that take place while you are entertaining a business guest or when someone comes to your home to deliver business-related materials. The same holds true for rental property: If you rent out a coach house or other guest quarters, you will need a separate liability policy for those buildings.
- Ohio Insurance Institute: Homeowners Insurance: An Overview
- American Bar Association: Liability Insurance
- American Bar Association: What Kind of Liability Coverage is Provided by a Typical Homeowner's Policy?
- American Bar Association: Who Needs an Umbrella Policy?
- MSN Money: Umbrella Policies Plug Holes in Your Coverage
Lainie Petersen writes about business, real estate and personal finance, drawing on 25 years experience in publishing and education. Petersen's work appears in Money Crashers, Selling to the Masses, and in Walmart News Now, a blog for Walmart suppliers. She holds a master's degree in library science from Dominican University.