If you’ve followed the news lately, you may have heard the unfortunate accident that occurred in suburban Kansas City involving a 5-year-old and a broken sculpture valued at $132,000.
According to the Kansas City Star, the Goodman family was attending a wedding reception at a community center in Overland Park, Kansas. On display in the center was a sculpture valued at $132,000. The Goodman’s 5-year-old accidentally knocked it over and broke the artwork. It was unrepairable.
Days later, the Goodmans received a letter from the insurance company representing the city of Overland Park. The letter stated that the family was negligent and therefore responsible for paying for the damages to the broken sculpture that was in the city's possession at the time of the accident. Essentially, the Goodmans received a bill for $132,000.
The last sentence of the initial story from the Star stated that the Goodmans hope their “insurance company can get this resolved.”
If you, a spouse, or child broke an expensive item, caused significant property damage or accidentally injured somebody outside of your home, will your homeowners insurance policy cover the damage, even if the cost of those damages is almost as much as a house?
After all, property and casualty insurance companies spend millions of dollars on advertising that promises consumers to cover “mayhem” and out-of-the-ordinary occurrences that make up a fictional insurance museum.
As with all questions regarding insurance coverage, the answer depends on the language in your policy.
While most people think of homeowners insurance as protecting their property against theft, fire or vandalism, many homeowners polices do cover “personal liability away from the home” that stem from accidents.
That’s because homeowners insurance policies typically contain a personal liability component. Renters insurance policies also typically contain liability components.
This is the part of your policy that covers you against financial loss if you are sued or found legally responsible for another person’s injury or property damage. The main purpose of a personal liability component is to protect your assets from an unexpected and costly occurrence.
Examples include breaking your neighbor’s window with a baseball, accidentally causing damage in a hotel lobby, or burning somebody in the park by accidentally spilling hot coffee on them.
Breaking a piece of expensive artwork on display in a community center also fits that category in most cases. To be sure, you should talk to your agent and review your policy to understand the full extent of your coverage.
Personal liability insurance may also cover the cost of defending your in a lawsuit.
Certain incidents are not covered, including:
- Injury or damage that involves driving, which are covered instead by your automobile insurance.
- Damage that is purposefully inflicted and/or part of a criminal act, such as vandalism or assault.
- Damages that exceed the liability limits of your homeowners policy. Personal liability coverage will only pay up to set dollar limit. You will have to pay out of pocket for a liability judgement that exceeds that limit.
One way to protect yourself further is to obtain a personal umbrella policy. This is an optional benefit that may provide greater liability protection beyond the limits of a standard homeowners policy.
An umbrella policy is simply an extension of your liability coverage. It provides coverage for anything that occurs beyond the limits of your standard insurance policy.
If your homeowners policy has a liability limit of $250,000, and you cause damage of $500,000, you would be responsible for the remaining $250,000. An umbrella policy, however, can cover that difference, minus your deductible.
Personal umbrella policies typically offer $1 million or more in liability coverage, up to $5 million.
It’s important that, as you research physicians mortgage loans for your next home, you also take time to find adequate homeowners insurance coverage. You never know when a freak accident might occur, and you want to be covered by insurance to avoid depleting your savings or going into further debt.
Just ask the Goodmans of Kansas City.
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Joel Palmer is a writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.