There is a great deal to consider when reviewing liability coverage.
If someone comes into your home and slips, serious injuries could result. If the person files a lawsuit against you and you lose the case, you may have to pay that person money for those injuries. This means you are “liable.”
Liability coverage in your policy does several things. Most obviously, it pays the damages that are awarded to the other person when you are found to be liable for bodily injuries or property damage. The maximum amount the policy pays is shown on your policy’s declarations page.
The policy also pays for the cost of an attorney to defend you, with no limit, and any other court costs associated with the suit. The basic limit of liability coverage that is included in a homeowners or tenants policy is $100,000. Higher limits are available for an additional charge.
So how much coverage should you purchase? In theory, you need to buy coverage at least equal to the greatest amount you could ever be sued. Of course, you’ll never know that exact number, so you should purchase as much coverage as your budget allows. The primary objective when purchasing liability coverage is to protect your assets: the value of your property, your earning ability, and any liquid assets you may own.