Legal liability is one of the trickiest, and some might say the one of the most thankless, issues in insurance. This is supposed to be a catchall, all-embracing type of insurance, but in recent years liabilities have become very high stakes issues for insurers and policyholders alike. Your basic home and contents insurance package should have a legal liability coverage section, and it’s a good idea to do a bit of research and think for a while about whether your cover is adequate.

Legal liability basics- What it is, and why you need it

Legal liability essentially covers any legal injury suffered on your premises. This doesn’t just mean someone tripping over a rug and spraining an ankle. It may include issues like other people’s property being damaged as a result of an incident on your property.

For instance-

• If someone’s car is on your property, and while holding a barbecue, the car is set on fire and everything in it is burned to a cinder, that’s a legal liability upon you as the property owner. You could be held responsible for the cost of the car, the personal belongings and other property in the car.

• If someone has an accident on your property resulting in an injury, you can be held liable.

• If a tenant is injured on a rental property, the tenant may hold you liable for the injury.

Legally, the basic principle is that the injured party is considered to have suffered as a result of being on your property. Generally speaking, even in a case of the other party being completely irresponsible and reckless, there’s a case to answer.

Litigation has been steadily increasing the possible liability for many years, and the question now is how much legal liability cover is enough. A typical ballpark figure for good legal liability cover is $10,000,000 to cover death or injury.

That may seem like a lot of money, but in terms of the costs of medical treatment and other related costs these days, it’s a realistic amount. Many of the court awards you see in the media for injuries are in fact paid by legal liability insurance, not the property owners. Legal liability is such a big issue that most financial advisors and property managers tell their clients to take out top value legal liability insurance on principle. A single incident can be a true financial disaster.

Best practice legal liability- How to dodge all the bullets

To make sure you have good legal liability cover:

• Talk to your insurer about a policy upgrade.

• Get a new home and contents insurance quote from another insurer and check your options.

• Make absolutely certain that you have legal liability cover for at least $10 million, preferably more. (Note: If your current insurer won’t provide that level of cover, you really do need another insurer.)

This isn’t going to be wasted effort. You don’t get any second chances with legal liabilities, so being prepared is essential. You can also improve your overall cover by upgrading other areas of insurance, like fire, theft, storms, etc while you’re at it. Good cover means peace of mind, and that’s priceless.