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The ABCs of liability insurance: Its coverage, benefits and costs 

Liability insurance is included in your home insurance policy. Whether you’re a homeowner or tenant, it gives you – and those living under your roof – financial protection against bodily injury and material damage that you may have involuntarily caused to a person and/or their assets. If this happens and compensation is called for, your insurer will cover it. If you are sued for damages covered under your policy, whether sustained in Canada or elsewhere in the world, this insurance also will cover you. 

Coverage in detail

Insurance contracts are all different. It’s important to carefully read every clause in your policy so you’ll understand what’s covered and what’s not. Beware: Damage and injuries resulting from intentional or criminal acts are always excluded, as are injuries you or your family members sustained. Home-based contractors should take out liability insurance related to their professional activities to ensure appropriate protection against injuries or damage caused to their clients or suppliers. Here are examples of bodily injury and material damage covered by liability insurance: 

  • Your untethered and unmuzzled dog bit the delivery man; 
  • Your bathtub overflowed and caused water damage to the apartment below yours; 
  • Your young neighbour was injured while under the care of your daughter who lives with you; 
  • Your barbecue exploded and set the neighbour’s shed on fire; 
  • Your son accidentally hurt another child while playing soccer. 
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They vary from one insurer to another and depend on the amount of coverage. The most common amount suggested for liability coverage is $1 million, but you can buy additional increments of coverage, up to $5 million, for just a few dollars more. So, if a fire that started in your kitchen has spread to all the units in your building, the excess liability coverage would be paid to compensate all those tenants. 

Filing a claim

Liability claims usually involve accidents that occur at home, like falls or animal bites. Notify your insurer as soon as an incident happens, and don’t undertake anything without the insurer’s consent. Your claim must be accompanied by supporting documents. Damage insurance experts don’t recommend filing claims of less than $1,000, considering you’ll have to pay your deductible and will face a potential premium increase the following year. However, if a lawsuit were filed, the amounts involved would likely be much higher than $1,000. 

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