As a single-family rental property owner, you know how important it is to protect your investment against potential financial losses. While insuring the dwelling is a crucial part of the picture, having adequate liability coverage may arguably be even more important.
What does liability coverage include?
Your insurance provider includes liability coverage in your landlord policy to protect you in the event that a tenant or their guest experiences an injury on your property, and as a result, decides to take legal action against you to cover medical expenses or other financial losses they’ve had as a result of the injury.
For instance, if your tenant or a guest slips and falls down the stairs on the rental property,
they may initiate a lawsuit against you. In such cases, your landlord insurance policy could help to either settle with the injured party or provide legal defense.
Why would you need $1,000,000 in liability coverage?
While “a million dollars” may sound like a lot and perhaps even unnecessary for a single-family dwelling, it’s important to remember that it’s not the value of the property that ultimately determines how much liability coverage is advisable but rather the potential costs of the risks it covers.
According to The Hartford, 80% of real estate liability claims were from slips, trips, and falls. If a tenant were to slip and fall on the property, this could potentially prove much more costly than you might think. The tenant might sustain long-term injuries that will require years of medical treatment, loss of income, and mental distress, which you as the landlord could be held liable for. There is also the risk of a lawsuit, which in the worst-case scenario could result in a lengthy legal battle. You don’t want to be left without the financial means to cover the expenses that may arise in this situation.
There are many examples of cases where the landlord suffered a severe financial setback. In a recent court case in New York, a tenant sued his landlord and received a $750,000 settlement after a slip and fall accident at the rental premises where he injured his back and neck.
Get the right liability coverage with Honeycomb
At Honeycomb, our policies always come with a minimum of $1M/$2M in liability coverage (per occurrence/aggregate), with the option to increase it to up to $4M*. When recommending a minimum of $1M/$2M in liability coverage for single-family dwellings, we are taking the following into consideration:
Protection Against Lawsuits: In the event of a lawsuit or a lengthy legal battle, a million-dollar coverage offers a substantial financial buffer to handle legal expenses and settlement costs.
Covering Medical Expenses: If someone is injured on your property, their medical bills can add up quickly and the injured might need continued treatment for years to come. A million dollars in liability coverage ensures that you have sufficient funds to cover this.
Asset Protection: In the event of a lawsuit, your personal assets could be at risk if your liability coverage is insufficient. Having a million dollars in coverage helps shield your personal wealth and assets from being used to satisfy a judgment against you.
Having adequate liability coverage is vital. Even though $1,000,000 might sound like a lot for a single-family dwelling, it's important because it shields you from unexpected financial troubles. This coverage can help you in the case of potential lawsuits and legal battles, covering big medical bills without hurting your personal finances, and safeguarding your personal assets from legal judgments.
* In California, it’s up to $2,000,000