Homeowners liability insurance covers any accidents that occur on your property, whether you’re there or not. Since this policy protects your most valuable asset, it’s important to understand all of the coverages and exclusions that come along with it before purchasing a policy from your insurance company. To help you out, here are some explanations to help you make an informed decision on what kind of protection your home needs.
What Is a Homeowner’s Policy
A homeowner’s policy is a comprehensive insurance policy for your home. It includes liability coverage for any accidents that happen in or around the house, as well as loss of use coverage if you are unable to live in your home because of an incident covered by the policy. Other benefits may include loss assessment coverage and additional living expense coverage while damage is being repaired. Liability insurance is one of the most important components of homeowners insurance because it can help protect your assets and yourself in a worst-case scenario.
- Liability coverage provides protection for bodily injury or property damage caused by you, your family members, or anyone on the premises with your permission. This includes injuries to someone who visits your home, such as a babysitter, delivery person, or contractor. If they are injured while they are in your house or on your property, liability coverage may provide compensation if they sue you.
- Liability coverage can also cover legal expenses if you are sued. If this happens, liability coverage will pay for attorneys’ fees and court costs so that you don’t have to use up other resources.
- In some cases, liability insurance can help cover an out-of-pocket settlement that could be costly otherwise.
How Much Coverage Do I Need
The first step in determining your coverage needs is to calculate the replacement value of your home. In general, you should purchase liability insurance for a sum equal to or greater than the amount required by the mortgage company. For example, if your mortgage company requires $250,000 in property damage liability coverage and you have a $350,000 home equity line of credit (HELOC) against your property, then you would need at least $500,000 in liability protection.