Homeowners insurance is really a package of protections. It covers damage to your own property, and it covers your liability, meaning legal responsibility, for injuries to others and damage to the property of others for which you become legally responsible. To an extent and under specified circumstances, your homeowner's insurance provides coverage that applies to civil lawsuits. Its limits may fall short, however, and may need to be supplemented.
Know Your Policy Limits
Imagine that a visitor to your home steps onto the front porch and falls through it. He is injured. He sues you, claiming that the condition of the porch was dangerous and that you were negligent. Your homeowner's insurance includes $50,000 in liability coverage. If the victim is awarded $10,000 and the suit is settled with legal fees and costs amounting to less than $40,000, then yes, your homeowner's insurance does a good job of covering this example civil lawsuit. If the victim wants $50,000, your insurance company offers to compensate with $30,000, the victim agrees and your defense cost less than $20,000, again, the insurance appears sufficient. If the victim is awarded $500,000 and the costs to defend you total any amount at all, your $50,000 of coverage falls far short.
Comply with Your Insurance Agreement
Insurance is in effect a contract. The insurance company agrees to pay within its limits and terms. You agree to comply with its terms. As an example, the insurance company may list certain breeds of dogs that it considers high risk. If you keep one of these dogs at your property, the insurance company will not provide coverage at all. If you claim you have a low-risk dog when in truth you have a pit bull, and the pit bull attacks a meter reader on your property, the insurance company could deny your liability claim, refuse to pay for your defense and refuse to compensate the dog-bite victim. You might think that because you pay premiums, the insurance company must defend you in a lawsuit. If you violate the agreement you have made, your insurer may not cover the lawsuit.
Liability issues can hinge on knowledge of a risk. As an example, suppose that you live in a climate with very icy winters. Whenever it snows, you habitually clear your walkways and driveways of snow. You salt or sand the ice to melt it. You take all reasonable precautions to protect anyone who might walk on your property from being injured by ice build-up. The pizza delivery person steps onto your dry porch and falls. She claims you are negligent and sues you. Your insurance company takes a role in assisting with your defense. You are found to be not liable. By minimizing known risks, you help save yourself and your insurance company from undue financial loss.
Add Umbrella Coverage
You can purchase insurance in addition to your homeowner's insurance known as an excess liability insurance policy or umbrella policy. This insurance extends your liability coverage above any existing limits on your homeowner's and auto insurance policies. If the liability limits of your homeowner's insurance became exhausted due to a civil lawsuit and/or a judgment against you, the umbrella coverage up to a much higher limit would provide another layer of protection.