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The Importance of Liability Coverage in Your Homeowners Insurance Policy


Owning a home can bring immeasurable joy and a sense of security to homeowners, but it also brings great responsibility. 

Protecting your investment should be a top priority, and while homeowners insurance is acknowledged as an essential component of homeownership, many homeowners overlook the significance of liability coverage within their homeowners insurance policy. 

In this article, we will delve into the critical role of liability coverage and its importance in safeguarding your finances, assets, and future well-being through financial protection.

  • Liability coverage is critical to protecting homeowners from legal and financial liability for accidents or injuries on their property.
  • Personal liability claims include medical bills, legal costs, and potential loss of assets.
  • Homeowners should assess coverage limits, consider supplemental options like umbrella insurance, and take preventive measures to lower liability risks.

What is homeowners insurance?

Homeowners insurance is comprehensive coverage that protects homeowners against financial loss resulting from damage to their property or belongings for covered perils (dependent on their specific policy and carrier). It provides peace of mind by offering financial protection in the face of unexpected events such as natural disasters, theft, or accidents.

Typically, a homeowners insurance policy includes several types of coverage, including dwelling (the structure of the home), personal property (belongings), and additional living expenses (temporary living arrangements during repairs). 

However, one aspect that deserves particular attention is homeowners’ liability coverage.

What is liability coverage?

Liability coverage—also known as personal liability insurance or Coverage E—is a crucial component of homeowners insurance. It provides protection to homeowners when they face legal and financial liability due to accidents or injuries that occur on their property, and it shields homeowners from liability when someone sues them for bodily injury or property damage.

There are two primary types of liability coverage:

  • Personal liability coverage provides financial protection if the homeowner is found legally responsible for injuries or damages suffered by others. 
  • Medical payments coverage covers medical expenses for individuals injured on the property, regardless of whether the homeowner is deemed legally responsible.

Why homeowners need liability coverage

Personal liability claims commonly include a number of facets, including: 

  • Medical bills 
  • Legal costs
  • Death benefits
  • Lost wages
  • Pain and suffering

According to a survey conducted by the Insurance Information Institute in 2020, 2.3% of homeowners insurance losses were due to liability claims (down from 3.7% in 2016).1 And while this may not sound significant, when you factor in that only 6% of all homes had a claim filed against their policy in 2020, the impact jumps tremendously.2

Protecting your finances and assets

Without homeowners’ liability coverage, homeowners can find themselves facing significant financial burdens. 

If an individual is injured on the insured property and holds the homeowner responsible, the homeowner may be liable for medical expenses, legal fees, and potential damages awarded in a lawsuit. These costs can quickly accumulate and jeopardize the homeowner’s financial stability, and can lead to the loss of personal assets—or in the most severe cases, bankruptcy.

Determining your coverage limits

It’s crucial for homeowners to assess liability coverage limits to ensure adequate protection. Factors such as the value of the property, personal circumstances, and potential risks in the area should be considered when determining coverage limits.

Homeowners should consult with their insurance agent to evaluate the appropriate level of coverage that suits the needs of the household and offers sufficient protection.

Not all homeowners insurance policies are the same when it comes to things like liability coverage and something as seemingly innocuous as the breed of dog housed on the property.

Many insurance providers place restrictions on dog breeds which can result in the denial of liability coverage where a “dangerous” dog breed was involved. If you are concerned about dog breed restrictions, consider Openly for a homeowners policy that has no breed restrictions. 

Additional liability coverage options

To further enhance liability coverage, homeowners should consider supplemental coverage options such as umbrella policies. These policies provide additional liability protection beyond the standard homeowners insurance policy limits, and kick in once the homeowners policy limits have been exhausted. 

Umbrella policies can be particularly valuable for homeowners with a high net worth or those seeking extra peace of mind.

Navigating the claims process

In the event that a liability claim is made, it’s essential to fully understand the claims process, which includes: 

  1. Promptly reporting any incidents to the insurance carrier, providing accurate details and supporting documentation. (An insurance agent can help with this.)
  2. Keeping thorough records, communicating effectively, and seeking legal assistance to ensure adequate protection throughout the claims process.

Tips for lowering liability risks

Prevention is key in mitigating liability risks. Regular maintenance of the property and proactively addressing hazards such as broken steps, loose handrails, or overgrown trees, can help prevent, or minimize, the likelihood of accidents or injuries, and liability claims. 

Consider implementing safety measures, such as installing proper lighting, securing swimming pools, or posting warning signs where necessary.

Secure your future with liability coverage

Liability coverage is a critical component of any homeowners insurance policy. Homeowners should leverage your insurance agent’s expertise and review their insurance policy together to ensure adequate liability coverage that aligns with their specific needs and risk profile. 

* We provide this information to help you understand insurance. Any coverage is subject to the terms of your policy. Please refer to your policy and declaration page for complete coverage details.

1 Insurance Information Institute, “Facts + Statistics: Homeowners and renters insurance.” Published 2021. Accessed 12 June 2023.

2 Elizabeth Rivelli. “Homeowners Insurance Claim Statistics and Facts.” Bankrate. Published 13 September 2022. Accessed 12 June 2023.

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About the Author

Alyssa Little | Senior Content Strategist

Alyssa is the Senior Content Strategist at Openly, collaborating with industry thought leaders to provide insightful and informative content in the home insurance space. With over 15 years experience in content marketing strategy, copywriting, and editing, Alyssa has refined her expertise through her work at such companies as Gartner, Nike, and Trupanion. Alyssa holds a BA in History from the University of Puget Sound and an MA in Museum Studies from Newcastle University.

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