What is Liability Insurance and How Does it Work?

Picture this. It's Monday morning. You're in a rush to leave the house. You step through the front door and immediately slip and fall on your behind. The freezing rain last night really did a number on your front steps. But you're late! There's no time to go around back and dig out the rock salt. So, you hop in the car and head off to work. Meanwhile, the mail delivery person shows up to your house. They slip and fall on the front step just as you did, but they also happen to break a leg. So now they can't work for a few weeks, and it happened on your property. Welcome to one of the many scenarios where you'd be glad to have liability insurance. When you're liable for something, it means you're legally responsible for it. In the example from the intro, you'd be liable for the mail carrier's injuries, because they got hurt on your property. Being liable could mean that a court demands you pay damages to that mail carrier. At the very least, it means you'd have to pay legal costs to defend yourself. That's what liability insurance is for. Liability coverage can protect you if you're found to be legally responsible for injuring someone or damaging someone else's property. That includes damages you're ordered to pay, as well as the legal cost of defending the lawsuit. There are two important kinds of liability coverage when it comes to home insurance. Personal liability and premises liability. Most home insurance policies include both types. Personal liability coverage deals with lawsuits for damage or injury that comes about because of your actions. Anywhere in the world. The coverage could help you with legal costs if someone, for example, sues you after you accidentally hit them in the face with a baseball while you're playing a game with friends. Or maybe you carelessly fell a tree and it crushes your neighbor's shed. Both scenarios could result in you needing to make a personal liability-related claim. Premises liability, on the other hand, deals with lawsuits that arise as a result of your property ownership. So our mail carrier example could be covered by premises liability. If someone gets hurt on your property, you can still be liable, even if you weren't present at the time. As its owner, it's your responsibility to make sure your property is reasonably safe for visitors. Liability insurance comes into play when injury or damage is caused by negligence. Negligence is the failure to do something that a reasonable person would have done in any given situation. What constitutes a reasonable person is something determined by the legal process. But generally speaking, if you didn't do something that you probably should have done, you could be considered negligent. From our earlier example, when you skipped salting the icy walkway, it wasn't because you wanted to injure someone, you just didn't have time. But as the homeowner, you're responsible for keeping your property safe for visitors. So that situation would have been negligent, and premises liability coverage could respond to any resulting lawsuits or damages. On the other hand, if you'd attacked the mail carrier with a baseball bat, you'd be on your own. Liability insurance doesn't exist to cover intentional acts. Pretty much any adult could use liability insurance. After all, accidents can happen to anyone. Homeowners, tenants, landlords, and everyone in between. A homeowner is responsible for making sure their home is safe for visitors. But tenants have the same responsibility. If you're renting your home, and a visitor gets injured due to your negligence, your landlord's insurance policy won't help. You are responsible for your actions, and you are responsible for your home. That's why everyone should have an active home insurance policy with liability coverage. Experts recommend having a limit of one to two million dollars in personal and premises liability coverage. When you buy a home insurance policy from Square One, you can choose a liability limit that fits your lifestyle. Choosing a smaller amount may lower the price of your insurance policy. But if you're a slob with a lawsuit, you'd have to pay any legal costs or damages beyond your chosen limit. Luckily, liability insurance coverage is pretty affordable. Bumping up your coverage limits by a few hundred thousand dollars might only cost you a dollar or two per month. The best way to see what it would cost is to get a quote on your home insurance from Square One. You can get one online in less than five minutes by clicking this link right here. Thank you for watching.