ALT="Homeowners Safety, roofing insurance scams" Tips, The Insurance Problem Solver"The first thing that might come to mind when thinking about homeowner’s insurance is protection for your physical, tangible property. It protects your house, attached structures, and your belongings. And it does do all of that. Depending on the kind of homeowner’s insurance policy purchased, though, it does a lot more. In fact, even if you rent and do not own your home, a renter’s policy protects your belongings and provides other, personal coverage to protect you financially.

In addition to your furniture, appliances, jewelry, and the contents of your apartment or condo, your property includes your savings accounts, retirement accounts, and other monetary assets. That’s where another very significant element of many kinds of homeowner’s insurance policies comes in: Liability Coverage.

What is Liability Coverage?

Briefly, liability coverage protects you from the risk of financial responsibility to someone else if they are injured, or if their property is damaged or lost because of your carelessness in or around your home.The fancier word for “carelessness” and the one used in most insurance policies is “negligence.”

For our purposes, we’ll define negligence as the failure to act as a hypothetical “reasonable person.” would in a similar situation. As a simple example, suppose that there was a puddle of water on your kitchen floor that you knew about but did not clean up. If your neighbor came over for coffee, and you did not warn her of the water on the floor, and she fell and hurt herself, you might be accused of negligence. In that circumstance, the liability insurance of the homeowner’s insurance policy may be triggered to financially protect you financially from costs associated with your neighbor’s injury. Without the homeowner’s liability protection of the insurance policy, your assets could be exposed to pay your neighbor’s medical expenses and other damages related to her injury.

How Does Liability Coverage Work?

When you buy most homeowner’s insurance policies, you get protection for your tangible property (furniture, carpets, etc.) but you also get a choice of various amounts of liability insurance. The amount that you choose is up to you, depending on the “bundle” of coverage that you pick. Factors to consider in deciding on the amount of liability coverage often involve the value of the assets that you wish to protect, and how much you can afford as the premium.

The liability coverage of the homeowner’s insurance policy protects against the risks specified in the insurance policy. Like other kinds of insurance, homeowner’s insurance covers accidents, not intentional acts. Also like other insurance policies, the dollar amount of coverage provided is stated in the insurance policy and varies with the premium charged and paid.

One of the vital features of the liability coverage is that if a covered occurrence happens, the insurance company steps in to protect you and your assets from the claim(s) of the person who alleges to have been injured or damaged because of your negligence. Your homeowner’s insurer will investigate the claim, determine the facts and otherwise do the necessary to protect you from individual liability for monetary damages to the extent of the dollar limits of your homeowner’s insurance policy. Your insurer may try to informally resolve the dispute with the claimant. If a settlement cannot be reached and a lawsuit is filed against you, the insurance company will hire an attorney to defend you in the claim at its own expense.

Do I Need to Know Anything Else?

Yes. Like in any other insurance arrangement, there are obligations that you must fulfill in the context of liability insurance. We will discuss them in a later article.