What is Coverage E: Liability - From an Industry Expert on Home Insurance


Coverage E: Liability in Homeowners Insurance


In most all homeowners insurance policies there is a line called Coverage E: Liability. This coverage protects you when a lawsuit is filed against you for damage to a person or someone else's property for a covered loss. Since they are suing you, you want to make sure you have liability coverage for your entire net worth. Think of net worth as everything you own, not counting your primary home and retirement accounts.

If you have a net worth over $500,000, look into buying an umbrella policy - super affordable for the extra protection it provides.

What's Covered?

First off, know that intentional damage caused to property or others is never covered. What is usually covered by your standard homeowners policy:

  1. Accidents Abroad: You are traveling, and accidentally break a statue in the hotel lobby, the hotel sues you for damages.
  2. Slips and Falls: A neighbor trips and falls on your step, breaking their hip, and sues you for lost wages and pain & suffering.
  3. Social Media Drama: You post something personally defamatory or slanderous about a social media star and they sue you for lost revenue. This would not be covered by default, but could be covered if you bought the Personal Injury add-on on your home policy. Sometimes, even after you purchase the Personal Injury add-on, cyber is excluded and requires a separate cyber policy. 
  4. Unfortunate Splash: Sometimes that diving board or slide can cause more headaches than fun. If the kid's birthday party leaves a neighbor's kid with a broken shoulder, you could be facing a lawsuit.  
  5. Broken Bounces: Trampolines can be fun but also dangerous. Many carriers will not offer home insurance if there is a trampoline on the property and others will still accept a trampoline, but only if there is also a safety net. If a neighbors kids jumps and lands the wrong way, you could be receiving a lawsuit.
  6. Unlucky Mailman: If your dog Rover gets a little too friendly with the mailman and leaves a flesh wound, you could face a lawsuit. Dog bite claims usually run around $30,000 and can sometimes be excluded by your home insurance policy. Many carriers exclude certain breeds of dogs, but include dog liability.  
  7. Dangerous Debris: Tree fell in your front yard without causing any damage, no big deal. But when the neighborhood kid falls off his bike and punctures his leg on the sharp branches, that is your responsibility. A lawsuit is possible.
  8. Fenceless Tragedy: Most all carriers will require there to be a fence or barrier around your pool. Reason why is if an unsuspecting toddler happens to wander into your backyard, fall in the pool, and drown, expect a heavy lawsuit on your hands. 
  9. Condo Oops: Your mom called and you accidentally left the water running. The water dripped down into the unit below you causing 25,000 in damages to their stuff. You could be facing a lawsuit.

These are just 9 examples that could be covered by Coverage E: Liability. Some examples require add-ons to be considered covered. To know exactly what is and is not covered by your policy, read your policy and check with your insurance agent. As a reminder, intentional damage is never covered.

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Coverage E is one of the trickier pieces of the homeowners insurance policy. If you are dealing with a specific lawsuit that you believe could be covered by your home insurance policy, it is best to first check with your insurance agent before filing a claim. You don't want to file a claim that will be rejected because even after it is rejected, it will still go on your claims history for 3-5 years. Since insurance carriers hate liability claims on any claims history, and charge more or outright reject coverage, it will likely cause you a lot of money in your future home insurance costs.

At your service,
Young Alfred