Understanding Liability Exposure
Liability is one of the most important insurance considerations for real estate investors. A single lawsuit can exceed property insurance limits and threaten your entire portfolio.
Types of Liability Claims
Bodily injury claims arise when someone is injured on your property. Property damage claims occur when your property or operations damage someone else's property. Liability claims can come from tenants, guests, or the public.
Common Lawsuit Scenarios
A tenant slips and falls on icy stairs. A guest is injured at a short-term rental property. A contractor is hurt during renovation. A third party is injured in a building collapse. Each scenario requires adequate liability coverage.
Coverage Limits
Standard landlord insurance typically offers $100,000 to $300,000 in liability coverage. Consider higher limits for properties with pools, hot tubs, or commercial use.
Negligence and Defense Costs
Liability coverage includes legal defense costs, which can exceed claim amounts. Even winning a lawsuit costs money for attorneys and expert witnesses.
Long-Tail Claims
Some liability claims emerge years after the incident. Ensure your insurance has tail coverage if you sell properties or change policies.