If I asked the average person on the street what liability limit they carry on their homeowners policy, I would bet 95% could not tell me. Liability is such important coverage, but the non-insurance person generally doesn’t see the significance of this coverage. Unfortunately, many individuals do not see the importance until something bad happens. And once something bad happens, it is too late. Liability means you are responsible for damage that has been done or damage that you have been accused of doing to another person. You don’t have to be guilty of this negligence to be sued by a person. If you are accused, who is going to defend you?
Have you checked attorney fees lately? You can be completely innocent and still have a big money situation to clear your name and protect your assets. I’ll detail five scenarios that could result in a liability claim.
- Are you a pet owner? I love my fur babies, Chopper (pictured with me) and Dozer. They are two “big boys.” Each weighs more than 75 pounds, and they can be quite rambunctious. What happens if they show their love to someone and knock them down? Would I be liable for a broken bone? Yes!
Dog bites and other dog related claims accounted for more than one-third of all homeowner liability claims dollars paid out for 2017, costing the insurance industry almost $700 million. Is that a lot of money to you? It is to me!
The Insurance Information Institute reports that the number of dog bite claims nationwide increased to 18,522 in 2017 which was a 2.2% increase from 2016. Not only are the number of dog bites increasing, but the amount of money paid per claim is increasing as well. The average cost per dog bite claim increased from $33,230 in 2016 to $37,051 in 2017. That’s an 11.5% increase in a single year. Rising medical expenses and the number of attorneys involved in these claims drive the claims higher each year. Since 2003 the average payouts per dog bite claim have increased by 90%. Did that high number register? 90% in the amount of payout. I predict the trend will continue.
Dog bites aren’t the only problems with pets. Other injuries may occur if your pet knocks down children, the elderly, or a bicyclist. Two years ago, I had a client whose dog was in their yard. A bicyclist rode in front of their home, and the dog ran after the cyclist. The dog did not hit or bite the cyclist, but the threat of the dog caused the cyclist to wreck. The wreck caused the cyclist to break a femur. We eventually paid $125,000 for medical bills and pain and suffering. And my client’s pet did NOT touch the cyclist. The simple threat of the dog caused the owner to be liable for the injury. You say how can this be, but it is. I could tell you story after story concerning animals and liability claims.
Another scenario that can occur is your dog attacking another dog at a dog park. Fur babies are like humans. Sometimes they are in a better mood than others. What if they don’t like a particular dog and get into a fight? I’ve read numerous horror stories where an owner was traumatized when their pet was attacked at a dog park. If this occurred, you would then be responsible for vet bills, continuing care, and how much do you think they may get for mental stress from the incident?
- You have kids, and kids love to play with other kids. Has your child asked to have other children over to visit or spend the night? Of course, they have. When you host someone else’s child, you are responsible for their safety and well-being. What if an accident occurs? Who will pay the medical bills? What if a permanent type of injury occurs where medical treatment or care giving is needed the remainder of the child’s life? No, we don’t want to think about that happening, but we’ve all heard terrible stories about it. What about a teenage party at your home? You can see the numerous opportunities for many things to go wrong.
- Do you run an in-home business? Do you sell a product out of your home? You don’t usually have someone come to your home to pick up inventory, but what if they want that special piece of jewelry and just have to have it today! Your client comes to your home and trips before reaching the front door. Could you be sued for this? Absolutely, you can be held responsible for the damage! Does your insurance company know you are running a small business out of your home? Do you have a business endorsement listed on your homeowners policy? I recently read a story about a delivery man falling and injuring himself. He was delivering product to a home-based business. The homeowner did not have a business endorsement on their homeowners policy. The company denied the claim, and the homeowner had to represent themselves. I promise you, you don’t want this situation to happen to you.
- Do you have a hot tub, a pool, a trampoline, or even a community pool? I don’t mean to be the Debbie Downer here, but all these are extremely dangerous from a risk perspective. I love all of this fun and have fully participated in all of these, but bad things can happen. I once had a client sued because their little girl was playing with an adult at the community pool. The man tripped and hit his head on the pool deck. The fall resulted in him being a paraplegic. The lawsuit took three years to complete. Do you want your life tied up for three years with all the stress? When an accident happens, and it changes someone’s life, they will be looking for compensation.
- Do you host parties or social events? The holidays are rapidly approaching, and much good cheer will be celebrated in individual homes. Do you take the keys of everyone who enters your home? Has someone left your home after having too much to drink, but you could not stop them? What if your guest is involved in an accident on the way home? In this case scenario, you could be held responsible for any injuries. What if the guest is injured at your home? Your homeowners liability will respond to this situation, so you need high limits.
I see so many policies with the minimum liability limit of $100,000. Sorry, but in today’s society, $100,000 is nothing in a lawsuit. The cost difference between $100,000 in liability insurance and $500,000 is less than $30 a year. Agents only write lower liability to save their loss ratio and make their bonus higher—not to keep your premium lower.
State laws vary as to the assets that are protected from a lawsuit. You should know what assets are and are not protected in your state. After you know what assets are not protected, you need to buy enough coverage to protect those assets. A great agent will complete an asset analysis to assist you in the amount of liability insurance needed. If $500,000 is not enough coverage on your homeowners policy, the extra layer of protection of a $1,000,000 umbrella may be needed.
I simply cannot stress the importance of high liability limits. I could write about at least another five reasons to maintain high liability limits, and I probably will in the future!