How Is Fault Determined in Home Insurance?
When catastrophe strikes, what’s your liability?
If you’re wondering whether your home insurance will consider you at fault for damages, it helps to understand the basics.
- Structure damage
- Personal property damage
- Detached structure damage
When paying for damages, home insurance is mainly focused on the type of damage. Your policy names specific things (like fire) that are covered, and excludes others (like earthquakes) unless you buy additional coverage.
In terms of “fault,” unless the investigation discovers you purposefully caused the damage – which would be False Claim Insurance Fraud – your insurance will cover costs as laid out in your policy.
Personal fault is mainly an issue with home insurance in personal liability cases.
Do I need liability insurance?The good news is, if you have home insurance, you likely have built-in coverage for liability. This pays for lawsuits against you, injuries others sustain on your property and external damages caused by you or your family.
The real question is: Do you have enough liability insurance?
The best practice is to look at your specific liability insurance and decide whether you’re comfortable with its coverage limit. If you’re not, you can increase it. This will relieve a massive financial and emotional burden if you get sued, have to pay for someone’s injury or replace their personal property.
Types of liability coverage
The first two are called “voluntary medical payment” and “voluntary property damage.” Medical coverage can range from around $1,000 to $10,000 and property coverage from $500 to $6,000.
If you or a family member accidentally injures someone, or someone gets injured on your property, voluntary medical payment coverage can pay for:
- Medical bills
- Dental bills
- Funeral expenses
If you or a family member accidentally damages someone else’s property, voluntary property damage coverage can pay for repairs and replacements.
It’s important to note that these coverages are “voluntary,” which means you can activate them regardless of fault or liability. If you feel responsible for damages or injury, you can use this coverage as a show of goodwill or to discourage legal action.
If someone does sue you for an injury on your property or damages you caused, that’s when the third type of liability coverage comes in. “Personal liability” is the section used for lawsuits against you. This is the largest coverage amount, ranging from $100,000 to $5,000,000. This is when it’s important to know if you’re at fault.
How to know if you’re at fault
When someone is injured on your property or you do damage to theirs, it’s not always obvious if you could have prevented it. Generally, your fault comes down to three questions:
- Did you know about the danger or potential for injury?
- Should you have known about the danger as a responsible homeowner?
- Did you do anything to eliminate or minimize the threat of injury?
Here are a few common scenarios:
Trips, slips and fallsIt’s easy to forget that your visitors aren’t used to avoiding that one loose step you keep meaning to fix, or to adjusting their eyes to the poor lighting in your hallway. And yes, you can be held liable if something happens to your visitor because of these conditions.
Avoid accidents by blocking unsafe areas, picking up loose objects and warning others if you spill something. Most importantly, maintain your household by fixing issues when you see them.
Ice and snowYou’ve no doubt heard it’s your responsibility to clear your sidewalk and steps of ice and snow. Always shovel and use salt or sand before it starts to accumulate. While the exact timing after a snowfall varies between cities, the principle is the same. Some hard work now will save you a lawsuit later.
Dog bitesYou’ll be happy to hear that dogs are included as family members in your home insurance. As the owner, you’re liable for your dog’s actions. While warning others or keeping it leashed won’t eliminate fault, it could prevent bites or property damage.
Swimming pool accidentsCommon sense here will keep you from facing a liability claim. Fencing off the pool or backyard, always have an adult on deck who knows CPR and has access to lifesaving equipment. And tell visitors not to run or play rough near the pool.
Will a claim affect my premium?It might, depending on the claim – but it’ll always contribute negatively to your risk factor. If that risk gets too high, your premium will reflect it. This makes increases hard to predict.
Your risk is determined by the number of claims you file or are filed against you, the type of claims, and how much the insurance company pays out for each.
Let’s say someone falls at your house so you get your insurance money to pay for their injury. You don’t make another claim for five years. Despite that claim, you’re still a low-risk client. Your premium may go up a bit, but the bigger loss will be the “claims-free discount” some insurers offer as a bonus.
Compare that to someone who’s had three injuries at their house in the last two years. The insurance company is noticing a pattern. Something about that household is unsafe and will be considered high risk to insure. Their premium will go up a lot more than yours did, and if the problem continues, they could lose their insurance and struggle to find a replacement.
It’s better to have insurance as protection and then decide on a case-by-case basis whether making a claim makes sense.
Reading about all the things you could be liable for make you want to protect yourself? Get a quote for home insurance that covers all the bases.