Think your homeowner’s policy will pay if you fall off a ladder? Think again. Get the facts on who is and isn’t covered when injured in your home.
Homeowner’s insurance can be confusing. We buy it to protect ourselves as homeowners, right? Yes and no.
The basics of homeowner’s insurance need to be unpacked to understand when the insurance company will pay.
More than 39 million people in the United States end up in the emergency room every year, and a majority of those visits are from falls and other accidents at home.¹
Sooner or later, someone in your household will get hurt at home. Serious injuries can cost thousands of dollars. It’s important for you to understand the “fine print” in your homeowner’s insurance policy to protect your family’s financial future.
What’s in a Homeowner’s Insurance Policy?
Don’t be embarrassed if you’ve never actually read your homeowner’s insurance policy documents. For many of us, it was just one more thing added to the list of requirements when we bought our first home.
If your home is free and clear of any mortgages, you don’t have to carry homeowner’s insurance. However, unless you’ve got piles of money stashed away, you’ll probably want the financial protection an insurance policy can provide.
Homeowner’s Insurance and Mortgages
If you have a mortgage, you have homeowner’s insurance. Every lender requires homeowner’s insurance to protect the value of the property. If the house burns down, their collateral just went up in smoke. Collateral means security for the loan.
In other words, if you stop making your mortgage payments, they can recover the money you borrowed by taking back the house and selling it. Homeowner’s insurance will cover the cost to rebuild the damaged home.
Most of the time, your insurance premium and property taxes are rolled into your house payment. Mortgage servicers put that part of your monthly house payment into an escrow account. Your taxes and insurance are then paid out of the escrow account when they come due.
Your mortgage lender is named on your homeowner’s insurance policy, and they get to control what happens to insurance money paid to fix your house.
If your home is severely damaged, the mortgage servicer makes sure the house is fixed by doling out portions of the insurance money as the repairs are being made. The insurance company will never pay you directly for property damage if you have a mortgage.
Homeowner’s Insurance Coverage Types
As the saying goes, you get what you pay for, and that holds true for insurance policies. The higher the coverage, the higher the premium. It pays to know what kind of coverages are included in your homeowner’s insurance.
Interior and exterior damage: Every policy has this type of coverage. The dollar limits may vary. Typically, you’ll buy enough coverage to cover the cost of your home, not including the value of the land.
Most policies cover the cost to repair or rebuild the damage caused by fire, wind, hail, and vandalism, and water damage from frozen pipes or appliance leaks. Most will not cover damage caused by earthquakes, floods, or poor home maintenance.
Loss or damage to personal belongings: Your policy may pay the replacement cost or the actual value of clothes, furniture, appliances, and other personal items ruined by a covered loss, up to certain limits.
You must be able to show proof of your belongings, their age and value. These days, video and photographic records of your belongings can be easily stored digitally in the cloud, or on a disk stored outside of your home.
Lodging: Some policies pay for a hotel or house rental fees while your home is under repair. The coverage may even provide a daily allowance for meals.
Homeowner’s Insurance Injury Coverage
Your homeowner’s insurance policy will help you directly by paying for home repairs, ruined personal items, and may even pay to put you up in a hotel. However, when it comes to someone getting hurt on your property, your policy only helps you indirectly by covering their injuries and defending lawsuits.
Homeowner’s insurance policies will cover personal injury claims, but the coverage is solely for injuries sustained by friends, neighbors, delivery persons, and others invited onto your property. That coverage does not extend to the homeowner, family members living at the property, or minor children in your care.
Your homeowner’s policy will not cover injuries to you or members of your household.
Most policies won’t cover injuries related to a home business. If you have a cake decorating business in your home and a client slips and falls carrying a box of cupcakes to their car, your client’s injuries may not be covered.
Of course, your homeowner’s policy will not cover injuries to anyone who entered your home illegally, even if you had to use deadly force to defend your home and safety.
The medical payments portion of your policy provides a small amount of coverage, usually from $1,000 to $5,000, to pay medical bills for non-household members injured on your property.
Med-pay is similar to no-fault car insurance, in that the insurance company will usually pay even when the circumstances of the injury are not your fault. Med-pay will not pay for lost wages or pain and suffering.
Example: Med-pay covered visitor’s broken wrist
John carried homeowner’s insurance with $100,000 of personal liability coverage and $1,000 of Med-pay coverage. John’s son Todd invited some friends over to shoot hoops in the family’s driveway.
While playing, Todd collided with his friend Sammy. Todd broke his collarbone and Sammy broke his wrist.
Sammy’s medical bills came to $950. Sammy had no reason to sue Todd’s father because there was no negligence. It was just a friendly game of hoops. Instead, Sammy filed an injury claim under the Med-pay portion of Todd’s homeowner’s insurance policy. The insurance company paid Sammy’s medical bills.
Todd’s medical bills came to $800. Todd also tried to file a personal injury claim under the Med-pay portion of his dad’s policy. The homeowner’s insurance company denied Todd’s claim because he is a member of the household.
The personal liability portion of your homeowner’s policy will cover $100,000 or more (depending on how much coverage you purchase) per occurrence for lawsuits alleging your negligence caused the injuries.
The insurance company won’t pay to defend you when injuries to others are caused by criminal activities like assault, sexual abuse, or illegal drugs.
Example: Dog Attack
Sue had a homeowner’s insurance policy with $1,000 in Med-pay coverage and $300,000 in personal liability coverage.
A UPS deliveryman named Frank came to Sue’s home to deliver a package. As Frank walked toward the front door, Sue’s Doberman jumped the fence and attacked him, causing serious injuries to Frank’s face and hands. When Sue tried to pull her dog away from Frank, the dog bit her as well.
Blaming Sue for not keeping her dog properly fenced in, Frank filed a lawsuit against Sue for $150,000 to cover his medical bills, out-of-pocket expenses, lost wages, and his pain and suffering.
Sue’s homeowner’s insurance company hired an attorney to defend Sue in court. Frank’s claim was settled before going to trial. The insurance company paid his claim under the personal liability coverage on Sue’s policy.
Sue also filed a lawsuit, seeking coverage under her homeowner’s policy for her $25,000 in medical bills, She lost her case, and her claim was denied because her insurance policy language clearly excludes the homeowner and household members from injury coverage.
Who Counts as a Household Member?
Just like any other insurance policy, homeowner’s insurance policies are contracts between the policyholder and the insurance company. State lawmakers usually require contracts to be in “plain language” so people can understand what they are getting into.
Homeowner’s insurance policies will not cover personal injuries suffered by the policyholder and members of the policyholder’s household.
Generally, that means everyone living under the same roof. The household members don’t have to be legally married. Couples who cohabitate and their children are considered members of the same household.
Household members may not live with you every day:
Shared custody: Children of parents with shared custody may be considered members of both households when it comes to insurance. So long as you have sleeping quarters in your home for one of your kids, they probably would be excluded from injury coverage under your homeowner’s policy.
College students: Your daughter may be living on campus in another state, but she remains a member of the household in her primary home. If she’s home for spring break and breaks an arm slipping on a spill in the kitchen, her injury probably won’t be covered by your homeowner’s policy.
Not every family member is part of your household.
For example, let’s say your Uncle Andy celebrated Thanksgiving dinner at your home. While walking into the dining room, he tripped over an extension cord that was stretched across the floor and broke his arm in the fall. Will your homeowner’s insurance pay for Uncle Andy’s injuries?
Not if Uncle Andy is dependent on you for his care and does not have his own home. If you are the person who makes his business and medical decisions, Andy may be a member of your household, even if he now lives in a nursing home and only visits for holidays.
On the other hand, if Uncle Andy lives independently in his own home, he would be considered a guest, even though you may be related. The insurance company would not consider him a member of your household.
It all boils down to the policy language. If there’s a dispute over insurance payments, talk to an experienced personal injury attorney about your homeowner’s insurance coverage.
Your Duties to the Insurance Company
Your homeowner’s insurance policy is an important contract. Whether you have a mortgage or own your home free and clear, be sure to have a copy of your current policy documents. The details of your coverage might change from year-to-year.
Read your policy and keep it in a safe place. It’s a good idea to keep proof of your belongings updated each year.
If someone is injured on your property, you are obligated to notify your insurance company as soon as possible. Don’t put it off.
It’s understandable that you might worry about your premiums going up, but if you’re slapped with a lawsuit because your dog bit the neighbor’s kid, the insurance premium will be the least of your worries.
If you are served with legal papers, tell your insurance company immediately and forward a copy of the papers. Legal papers like summons, notices, and subpoenas are time-sensitive. If you ignore them, the court can find you guilty by “default.”
Keep in mind that unlike the movies where someone hands you an envelope and declares “You’ve been served!” legal papers usually come in the mail.
You have a contractual obligation to notify your insurance company, and you’re also required to cooperate with the insurance company’s investigation into what happened.
The insurance company will want to hear your side of the story. You may be asked to submit to an “Examination Under Oath” also called an “EUO.”
In an EUO, you’ll be asked a series of questions after giving your promise to tell the truth. EUOs are more formal than a recorded statement because you are under oath, and the EUO is conducted in person.
Another important obligation is to “mitigate damages” which is a fancy term that means you’re supposed to keep things from getting worse. If your dog got through a hole in your fence and bit the delivery guy, you should fix the fence right away.
When You Need to Hire an Attorney
Your homeowner’s insurance company has a duty to defend you when an injured person files a lawsuit against you for covered injuries. If you’ve been sued and your insurance company won’t help you, talk to an attorney.
You’ll also need expert legal advice if the insurance company disputes coverage for hazards in your home. For example, toxic mold claims have been heavily litigated in recent years.
The only way to battle your insurance company and their army of lawyers is by hiring a skilled personal injury attorney. You won’t have to pay upfront to hire an attorney.
Reputable personal injury attorneys will agree to represent you on a contingency fee basis. A contingency fee means you won’t pay the attorney until the attorney settles your case or wins it at trial. The attorney’s fees are paid out of the amount of your settlement or court award.
Contingency fees usually range from 25% to 40% depending on the time it takes to resolve the case, and if the case goes to trial.
With a contingency fee arrangement, you only pay attorney fees if you win your case.
There is no charge for the initial consultation. There’s no obligation, so don’t wait to find out what a good personal injury attorney can do for you.
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