Homeowners vs. Property Liability Insurance
Posted by: Agent Hub
For homeowners, an insurance policy can provide peace of mind. After all, a catastrophic event is devastating enough on its own, but without a good insurance policy, a catastrophe can be financially devastating, too. For this reason, homeowners invest in their property, and sanity, by paying for an insurance policy. But when it comes to understanding the different types of insurance coverage, things can get confusing. As an agent, you might understand the nuances of various policies, but explaining it in a way that your client can understand might be challenging. For example, the insured might not understand the difference between homeowners insurance and property liability insurance. Although both policies share characteristics, there are key differences as well.
What Does Property Liability Insurance Cover?
Property insurance differs from homeowners insurance in that it offers first-party coverage. Essentially, this means that in an insurance contract, the insured is the first party and the insurance company is the second party. For homeowners and insurance companies, this simply means that if there is a first-party coverage loss, the insured will get reimbursed for the damages incurred.
When it comes to coverage, property insurance isn’t limited to the home. In addition to residential buildings, property insurance policies can also insure commercial buildings, boats, and automobiles.
What Does Homeowners Insurance Cover?
Homeowners insurance reimburses homeowners for their financial losses suffered during an unfortunate event, such as a burglary, fire, or natural disaster. Unlike property liability insurance, a homeowner’s insurance policy typically contains more than one type of coverage, including both property and liability coverage too.
For example, if a homeowner’s property suffers damages from a hurricane, the insurance company will reimburse the policyholder for the amount it takes to repair the damages. This instance is the first party and property section of the policy. But the liability section of the policy covers the homeowner in other scenarios. For example, let’s say the aforementioned and hypothetical hurricane causes a sinkhole to develop in the homeowner’s yard. If a person is injured in the yard and, as a result, decides to sue, the liability section of the policy defends the lawsuit and will pay the injured individual. This way, the homeowner won’t be left footing the bill for something that occurred on their property but was out of their immediate control.