Property Liability Insurance Vs. Home Insurance

Homeowners insurance is something that every homeowner either has or should have, with the exception being those who are so wealthy that the loss of their home would have no serious effect on their financial situation. Anyone paying off a home mortgage is likely required by their mortgage lender to have a homeowners insurance policy because this is what protects the lender's financial interest in the home, ensuring that if the home is damaged or destroyed, it's protected by adequate insurance coverage.

What Homeowners Insurance Covers

Homeowners insurance typically covers three areas of potential loss:

1. Damage or destruction of the physical dwelling and other structures, such as garages, sheds and fences. This damage or destruction must be the result of a specific peril outlined in the homeowners policy.
2. Personal property that is damaged or destroyed as the result of any of the same perils covered under the dwelling coverage in the policy.
3. Personal liability coverage protects you in the event that you or someone in your household is sued as the result of property damage or bodily injury caused to a third party. This part of your homeowners policy will help pay the costs of defending you in a lawsuit, even if the matter is settled out of court.

Sometimes You May Need More

While your homeowners insurance policy has a section that provides you with a certain amount of liability insurance, it should be understood that any and all claims against that policy will only be paid up to the policy limits set forth in the contract. As an example, let's say you have a backyard trampoline and one of your neighbor's children has an accident and breaks his neck. The medical costs for this injury plus a potential lifetime of this child being confined to a wheelchair could amount to a judgment equaling millions of dollars. This amount will surely be significantly more than the liability coverage limit in your homeowners policy.

One solution to this problem is to take out a property liability policy to address any particularly high risk situation you have on your property. A backyard swimming pool likely puts you into this high-risk category.

Another strategy you can use to cover your excess liability risks is to take out a PUP (Personal Umbrella Policy). This coverage works in conjunction with not only your homeowners but also your vehicle insurance. Consult with your agent.