Coverage E: Liability in Homeowners Insurance
In most homeowners insurance policies, there is a line called Coverage E: Liability. This coverage protects you when a guest files a lawsuit against you for damage or bodily injury that occurs on your property. Since they are suing you, you want to make sure you have liability coverage for your entire net worth. Net worth generally can mean everything you own outside of your primary home and retirement accounts.
If you have a net worth over $500,000, look into buying an umbrella policy - an affordable boost to your liability coverage up to $5 million.
First off, know that intentional damage caused to property or others is never covered. What is usually covered by your standard homeowners policy:
- Accidents Abroad: You are traveling, and accidentally break a statue in the hotel lobby, the hotel sues you for damages.
- Slips and Falls: A neighbor trips and falls on your step, breaking their hip, and sues you for lost wages and pain & suffering.
- Social Media Drama: You post something personally defamatory or slanderous about a social media star, and they sue you for lost revenue. Coverage E would not cover this unless you purchased the Personal Injury add-on on your home policy. Sometimes, even after you buy the Personal Injury add-on, cyber is excluded and requires a separate cyber policy.
- Unfortunate Splash: A 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.
- 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 neighbor's kid jumps and lands the wrong way, you could be receiving a lawsuit.
- 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.
- Dangerous Debris: Tree fell in your front yard without causing any damage, no big deal. When the neighborhood's kid falls off his bike and punctures his leg on the sharp branches in your driveway, that is your responsibility. A lawsuit is possible.
- Fenceless Tragedy: Most carriers will require there to be a fence or barrier around your pool. The reason why is if an unsuspecting toddler happens to wander into your backyard, fall in the pool, and drown, expect a big lawsuit on your hands.
- Condo Waterfall: 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 nine examples that could be covered by Coverage E: Liability. Some cases require add-ons to be considered covered. To know what is and is not covered by your policy, read your plan, and check with your insurance agent. As a reminder, intentional damage is never covered.
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 is not covered, because even if the claim has a $0 payout, it still goes on your insurance record for five years. As insurance carriers hate liability claims 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,