Liability Coverage

A house insurance policy has two main parts: property damage protection and personal liability coverage. This is designed to protect the insured against lawsuits for property damage or injuries suffered by another person. Usually, this covers events that take place on the insured's premises as well as events that take place off the insured's property but were a result of the policyholder's actions. Liability coverage typically pays for the medical expenses of the injured party (if applicable), any legal judgments issued against the homeowner, and the legal fees of the homeowner in the event of a lawsuit.

Personal Liability Section

This section of your house insurance policy shelters you against lawsuits and claims that result from property damage or bodily injury to others caused by accidents on your property or your activities off the premises. In other words, if you inadvertently injure someone on or off your property, your homeowner's plan will most likely look after you. Business and vehicular-related events are excluded from the agreement. Standard coverage will apply to the homeowner and any family members who live in the home.

Medical Payments

If someone suffers an injury on your property, the medical payments portion of your policy will reimburse the injured party for his/her medical expenses regardless of fault. Most standard house insurance policies have very low limits for medical payments coverage, usually $1,000-$4,000. Additionally, medical payments does not apply to injuries you or your family members suffer.

Selecting the Amount

Homeowners should purchase at least enough to protect the full value of their assets. If you do not insure the full value of your assets, one lawsuit could put everything you own at stake, including your home, cars, savings, retirement accounts, stocks, etc. The standard amount is $300,000, but your home by itself is probably worth more than this. Additional coverage is a wise idea for most homeowners, especially since the costs of more protection are minimal in most cases. To determine how much you need, calculate your net worth by adding up the value of all of your assets.

The Umbrella Option

Homeowners who wish to supplement their basic personal liability protection can do so with an umbrella liability policy. Umbrella policies provide affordable extra peace of mind for both home and auto insurance policies. Sometimes, homeowners can save money by keeping their coverage low and purchasing an umbrella policy to make up the difference. An umbrella policy can add $1,000,000 of protection to your standard home insurance policy for about $150-$500 per year.