Liability Coverage Homeowners Insurance
Homeowners insurance is designed not only to protect your home and your belongings against loss, but to protect you from liability for injuries to others, and liability for damage to the value of property of others. You may buying homeowners insurance years ago when you first purchased your home and continued to renew it every year without thinking about it. Now is the time to think about it again, before a loss occurs that you can’t afford.
In this section we discuss types of homeowners insurance available (including condominium and renters policies), what kinds of losses are covered and not covered, where problems arise with limits of liability (internal limits, exclusions, etc.) and some solutions to these problems.
The summaries of the coverage’s available may sound familiar, especially if you’ve ever filed a claim under your homeowners insurance policy. We may end up reviewing some of the coverages and exclusions you already know about. Don’t feel like you have to memorize your policy. It is more important to be able to read and use the policy in order to determine what is and is not covered. Sometimes you will have to read several parts of your policy (maybe more than once) to be sure you are correct. This is a normal part of determining coverage, not a sign that you don’t understand the policy. It’s a process your insurance agent goes through, insurance companies go through, and the courts go through.
Analyzing Your Coverage
With any insurance policy, assessing the coverage you already have is the first step to determining what changes need to be made or what additional coverages you may need.
• Are you planning to sell your home and move to a condominium, apartment, or mobile home?
• Are you planning to transfer some or all or your interest in your home to your children?
• Are your standard insurance policy limits sufficient to cover you in the event of a loss?
• Has your home increased or decreased in value?
• Have you accumulated jewelry, collections, fine art, or other valuables which aren’t covered in full or are excluded entirely from your existing coverage?
• If you have a residence employee, do you know how he or she is covered by your homeowners policy?
If you’re 50 years of age or older, it may pay to audit your homeowners coverage. This is especially true if you have recently become an empty nester, purchased a second home, increased the amount of travel you do, retired, or made other significant life changes.
Don’t Skimp on Liability Coverage
Pay particular attention to issues involving liability. This coverage protects your assets against lawsuits. Review the liability limits of your insurance policies. In the past most of the personal liability risks you faced probably came in some degree from your business insurance or work. For most people, homeowners insurance offers their main insurance riders protection from non-work related personal liability coverage. As you spend more time away from work, and as you accumulate more assets, your homeowners insurance policy assumes more importance as your primary liability coverage.
A standard homeowners policy provides $100,000 of liability insurance. For a nominal increase in your premium, you can increase your coverage to $300,000 or more.
A standard HO-3 policy with $100,000 in liability coverage that costs $745 annually (in 1994) cost only $8 more with a liability limit of $200,000. It cost only $15 more to increase the liability limit to $500,000. By any measurement, the added coverage is a good deal.
Remove your adult children from your policy if they no longer live at home. Many people continue coverage for their children for too long. There are a couple of advantages to removing adult children from your policy. First, you will no longer be liable for their accidents (and those of their children). Second, they can buy the coverage that best meets their needs.
Liabilities created by children or grandchildren who live with older relatives make up a major portion of the homeowner title insurance disputes that result in litigation. Especially problematic are situations where your relatives could be considered part of your ”household”, because they live in a house or apartment you own, or rent their living quarters from you.
You probably do not intend that the insurance on your home and belongings should be put up as collateral for the actions of your children or grandchildren. If a grandchild who rents your upstairs apartment causes injury to another person, is it fair that you could be held liable, just because you’ve purchased insurance on your home?