Reviewed by Stefan Tirschler
Updated September 11, 2023
‘Liability’ is a term used frequently in the insurance industry, but what does it actually mean? To be liable for something simply means you’re legally responsible for it. So, liability insurance protects you if you’re alleged to be responsible for injury you accidentally cause to someone or if you damage their property.
Here’s everything you need to know about liability insurance.
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Home insurance deals with two kinds of liability; personal and premises. But, before we highlight the differences, it’s important to understand the concept of negligence. Negligence can be defined as ‘an unintentional act that results in losses sustained by a third party’. For liability coverage to apply, it must be shown that the act in question was not deliberate, but was the result of your negligence. In other words, liability insurance will not protect you against intentional acts, such as violence, libel or slander.
Your Square One home insurance policy protects both your personal and your premises liability. Personal liability relates to lawsuits that arise from your actions which cause injury to someone or damage to their property. For example, if you’re playing golf on holiday, accidentally hit somebody with your ball and they decide to sue you for their medical costs, personal liability coverage would apply. It would also apply if you accidentally scratch a friend’s hardwood floor, and they seek to recover the repair costs through litigation. This coverage applies to your actions anywhere in the world.
As the name suggests, premises liability insurance protects you against lawsuits arising from injuries sustained by visitors to your home. Common examples here include neighbours who slip and fall on your icy porch, or your dog biting the mailman. Legally speaking, you owe a ‘duty of care’ to everyone who sets foot on your premises. The extent of this care depends upon your province/territory and the classification of the individual, but essentially, you’re required to take reasonable steps to ensure that nobody is hurt on your premises. If you’re found to be negligent in this regard and the injured party decides to sue you, premises liability insurance will respond to any covered losses.
Once you’re living alone and are considered legally responsible for your actions, it’s worth thinking about liability insurance. Homeowners, especially, should consider the risks associated with their property and the requirements the law places upon them to ensure that the premises is safe. Even renters should consider liability insurance, as their landlord’s insurance offers no protection for their personal actions. So, if you’re renting a unit and a visitor trips and injures themselves, you may be liable in the event they decide to sue.
The costs of a liability claim can be overwhelming for the average person, often reaching hundreds of thousands of dollars. And remember, the size of the claim isn’t necessarily limited to just medical fees; the plaintiff may seek damages for income lost as a result of injuries or damage sustained through your negligence.
For this reason, it’s vital to protect your liability. Many home insurance providers will include liability coverage in their policies. Square One goes one step further by allowing you to customize your coverage and select a deductible that you’re comfortable with. In fact, you can get a personalized quote online in only 5 minutes.
As mentioned above, liability insurance will not protect you against deliberate or intentional acts. While this may seem obvious, there are a number of other situations where liability insurance does not apply.
Personal liability insurance will not cover you for business-related losses, such as injuries or property damage that you cause in the course of your work, or injuries that other people suffer when visiting your place of business. If you buy, rent, use or occupy a premises (including your home) for business purposes, you must discuss this with your insurance advisor; they will assess your needs and help you find liability insurance coverage that will protect you in the course of your work, as well as the premises where you carry out your business.
Personal liability insurance also limits coverage for losses arising out of your ownership or operation of certain watercraft, aircraft and powered vehicles. This usually includes boats, jet-skis, ATVs, dirt bikes and large drones. The liability risks associated with these vehicles can often be insured under a separate policy.
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Liability insurance is only one part of your overall home insurance quote. Square One’s online platform shows you exactly how much of your quote comprises your liability insurance, and how this value changes depending on your limit of insurance. For prices specific to your property, get a quote in less than 5 minutes. Or, check out the table below for a rough idea of the cost of liability insurance.
|Liability insurance limit (primary homes)||Average cost (as part of overall quote)|
Square One recommends a minimum limit of $1-2 million for personal and premises liability, though customers have the option to reduce or increase this amount. Reducing the limit of coverage may decrease your premium, but will also mean you’re responsible for the costs of any covered losses that exceed your limit of insurance.
Square One allows Canadian customers to choose from the following liability insurance limits: $500,000; $1 million; $2 million; $3 million.
The short answer is: yes, but to varying degrees. Every insurance provider structures their policy in a unique way, but in most cases, your children will be automatically included in your personal liability insurance coverage as long as they are dependant minors in your care. For example: if your ten-year-old accidentally throws a ball through your neighbour’s stained-glass front door, your personal liability insurance will cover the repair costs. Some insurance providers, including Square One, will continue to protect your children while they are temporarily away at school – as long as they remain dependant upon you.
Maybe. Some insurance providers restrict the coverage provided for injury caused by certain breeds of dog, exotic animals, and even damage caused by pet insects and vermin. Speak to your insurance provider or check your policy wordings to be sure of what’s covered under your personal liability insurance.
If you’re being sued, either for personal liability or premises liability, your first step should be to report the claim to your insurance provider as soon as possible. Being served with legal papers is an unpleasant surprise, but it’s important to treat the matter with urgency in order to avoid a default judgment against you. Upon receiving notice of your situation, your insurance provider will assign an experienced liability loss adjuster to assist you.
If your loss falls within the coverage provided by your home insurance, your adjuster will help you through the process of choosing an attorney and your insurance provider will pay for the cost of your legal defence. Compensatory damages awarded against you will be covered up to your limit of liability coverage, and other potential costs, including lost wages while you’re in court, will generally be covered up to a certain amount. Depending on the nature of the policy you purchased, a deductible may or may not apply to the claim.
Want to learn more? Visit our Home Insurance Basics resource centre for dozens of helpful articles to guide you through the ins and outs of home insurance. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.
About the expert: Stefan Tirschler
Stefan is responsible for underwriting leadership, market expansion, and product research and development for Square One's operations. Stefan has earned his Fellow Chartered Insurance Professional designation, and maintains a level 2 general insurance license in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Stefan is also an Education Committee member and CIP/GIE instructor for the Insurance Institute of Canada.
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