How Does the Liability Coverage in Your Insurance Policy Protect You?

When most people think about insuring their home or vehicle, they instinctively think about protecting their own assets. And insurance is undoubtedly an important tool to minimize financial loss if someone else causes an accident or a disaster occurs.

But what about the protection from legal liability included in your policies? What is covered by insurance under standard insurance contracts? And what limitations does your policy have? Here are the answers to your questions. 

What Is Liability Insurance?

Liability coverage refers to insurance that compensates you or pays for financial issues that arise if you accidentally cause harm to others. It is a cornerstone part of many standard homeowners and vehicle policies as well as many types of business owner coverage. The goal is to protect you from lawsuits over things like accidents on your property or unintentionally causing a crash on the road. 

What Does Liability Insurance Pay For?

Each insurance policy is unique to its own wording and limitations. But in general, most homeowners, renters, and auto insurance policies pay for some common expenses if there is an accident.

These include the medical expenses of someone who was injured on your property or as a result of your driving, damages awarded or settlements agreed to in a personal injury lawsuit, the cost of an attorney if you are sued, and benefits for the surviving family if someone dies. Costs are covered up to the limits stipulated in your particular policy. 

Is Liability Insurance Mandatory?

Most states require drivers and car owners to carry a minimum amount of liability insurance to protect those around them. In Illinois, for instance, motorists must purchase insurance coverage for at least $25,000 for injury or death of others if you're liable for an auto accident and $20,000 to cover damage to another party's property (like a car, home, fence, or business).

On the other hand, states generally do not mandate that homeowners or renters buy insurance that includes any liability coverage. If you have a mortgage, your lender usually does require basic insurance. However, this is usually coverage for the structure and property that secures the loan rather than coverage for your personal financial liability. 

What Doesn't Liability Insurance Cover?

As with all insurance policies, liability coverage is limited. As mentioned, the limits in your particular policy specify the maximum the insurer will pay out. Beyond this, it's your responsibility. Consider the Illinois minimum of $25,000 for bodily injury to a person. Most Americans can easily see how easily medical costs or a lawsuit could exceed this number very quickly. 

In addition, home- and auto-based liability insurance is meant to cover accidental and unwitting damage to others. So the insurer isn't likely to cover an accident where you intentionally hit your ex's new car or pushed some innocent salesperson down the front steps. 

Finally, how you use your asset affects proper insurance coverage. Most policies exclude business use of a vehicle, including delivery or ridesharing services, as well as liability that occurs during a business activity like cutting clients' hair in your home. 

How Can You Ensure the Right Coverage?

Clearly, good liability insurance protection is vital in today's busy world. You need to have sufficient coverage limits to pay for rising costs and potential personal injury lawsuit damages. If you have a side hustle or are self-employed, you may need to add business insurance. And with specific risk factors, like a large dog, you may need additional policies. 

The best place to begin is in a meeting with a qualified insurance agent. Clover Insurance Agency has assisted your Illinois neighbors with all their home and auto insurance needs for more than four decades. Make an appointment today to get answers to your questions and help crafting the ideal liability protection.