Third-party liability coverage is the portion of an insurance policy that protects you if you’re sued (or threatened to be sued) for a physical injury or damage to someone else’s property. Also referred to as “legal liability coverage,” this section of your home or car insurance policy is set up to cover things like legal fees, the amount of money you have to pay to settle a lawsuit, and other related expenses.
So, how does liability coverage work in real life? And why is it so important? We’ve got the answers to these questions and more.
Here are a few examples of real-world scenarios that could be covered by the third-party liability section of your home or car insurance policy:
Accidents happen, even when you take all the right steps to prevent them — and accidents often result in lawsuits that can have serious financial consequences. All of the scenarios we’ve listed in this post are examples of times when you could be held legally responsible for injuries or damage to other peoples’ property. Lawsuits can be expensive, but liability coverage ensures you won’t get stuck paying out of your own pocket when the unexpected happens.
No. When you’re operating a vehicle, liability for injuries or damage to other peoples’ property is not covered by your home or tenant insurance policy — so you’ll need to carry enough liability coverage on your car insurance policy to protect you in case of a driving-related mishap.
You should buy enough liability coverage to protect your financial security. Once a claim has exceeded the limit in your policy, you’ll be responsible for paying the remaining balance — which, depending on the severity of the situation, could lead to financial trouble or even bankruptcy. The more liability coverage you have, the less you’ll have to pay out of pocket if you’re involved in a lawsuit.
Increasing the liability limit on your car or home insurance policy may cost less than you think, so it’s worth contacting us to find out how much it would cost to take your coverage to the next level.
If you have a lot of assets to protect, you might need more liability coverage than what’s included in your home and car insurance policies. An umbrella insurance policy allows you to extend your third-party liability coverage beyond your current limits.