What Liability Limits Should I Carry on My Homeowners Policy?

When you begin reading your insurance declarations page you may come across the phrase “Limits of Liability” listed at the top of the page. While this is not incorrect to call all coverages on an insurance policy limits of liability, this post is referring specifically to the Personal Liability listed on a homeowner’s policy. If you are wanting more information on the property coverage provided by your homeowners then you can find that here: https://www.bradshawweil.com/blog/a-basic-guide-to-your-homeowners-insurance/.

By definition Coverage E- Personal Liability covers 2 areas:

Bodily Injury- bodily harm, sickness, or disease, including required care, loss of services, and death

Property Damage- Physical injury to or destruction of tangible property, including loss of use.

This coverage applies to bodily injury or property damage that arises out of the insured’s personal activities that occur anywhere. The same coverage also applies at the insured location. This coverage does not include liability for any business activities the insured is involved in, no matter the location.

In order for a claimant to collect a payment from an insured’s Coverage E- Personal Liability they must be able to prove the insured negligent. Was a handrail loose that the insured should have had fixed? Is the tree limb hanging over the driveway dead and should have been removed? In the event that the insured was doing everything a prudent person would have done to maintain their property then the injured party would not have a claim under Personal Liability.

The question then becomes, “Why carry such high limits for Personal Liability if I am maintaining my home as a prudent person would?” The answer has multiple parts. First and foremost, Personal Liability Coverage also states that the insurance company will provide a defense for the insured at the insurer’s expense even when the charges are groundless.  Legal costs are high. Enough Said. Secondly, you cannot limit or know what someone could sue you for. In the event that they do sue you and win, you will need protection from your insurance policy.

Personal Liability is usually sold in limits of $100,000, $300,000 or $500,000. Bradshaw & Weil, Inc. strongly recommends at least $300,000 for most cases. You should consider your assets and net worth when deciding on the limit you purchase. You should also consider if you have additional liability in place in the form of an umbrella policy.