When you hear people say, You can never be sure of anything these days except death and taxes, well, I disagree. There is one more thing that you can be certain will happen to us all and that is the need for liability insurance. It's a requirement for auto insurance titles and tags in most states, and it's just as important to a mortgage lender. Nobody wants to loan money on a home that is not insured against certain losses. No matter how you're paying for a property, whether you're closing fast or whether you're closing on a conventional mortgage when buying a home, you'll need to arrange for a liability insurance policy before the closing takes place.
So, what are the types of losses that liability insurance on a home will cover? The first thing to know is that liability insurance doesn't cover the loss of your home itself or the loss of your possessions. Those losses are entirely different. Liability insurance covers losses that affect another person inside your home or on your property. Liability insurance protects you and your lender from financial loss when somebody else sues you or is threatening to sue you because they were injured in some way.
Let me give you some examples:
1) Your dog bites the postman in your yard when he's delivering mail to the mailbox on your porch. The postman is hospitalized for several weeks and has a big bill to pay. He can sue you for his hospital bills and your liability insurance coverage will pay them.
2) Your mother's friend slips on the ice on your front walkway when she's getting out of her car to attend a baby shower for your daughter. She has a hip fracture requiring surgery and physical therapy. Her bills are enormous and she could sue you to pay her bills if your insurance company didn't pay her under your liability insurance coverage.
3) A burglar slips and falls from a ladder propped up against your house when he's trying to pry open a window to get inside and steal your TV set. Believe it or not, he can sue you for his medical costs despite the fact that he was in the process of committing a crime. It's truly astonishing, but that is exactly the type of injury that has won jury awards in court, and your liability insurance company knows that so it is more likely to settle a claim against you than take a chance of losing the case in a lawsuit.
So there you have three examples of things that have happened over and over requiring liability insurers to pay claims, protecting homeowners from great financial loss. The insurance companies will always try to settle a claim before going to court, since lawyer's fees and court costs only increase their pay-out.
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