Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
A client's homeowner's policy has a personal liability limit of $300,000. While the client is away on vacation, a pipe bursts in their home, causing $50,000 in water damage to their neighbor's attached property. The neighbor makes a claim against the client for the damages. How much will the client's homeowner's policy pay for the neighbor's property damage under personal liability?
- A$0
- B$50,000
- C$300,000
- DThe amount will be determined by the client's own property damage coverage.
Show answer & explanationAnswer & explanation
Correct answer: B. $50,000
Personal liability coverage in a homeowner's policy covers bodily injury and property damage to others for which the insured is legally responsible. The policy will pay up to the liability limit for covered losses. Since the damage is $50,000 and the limit is $300,000, the policy will pay the full $50,000.
Why the other options are wrong
- A. This type of damage to a neighbor's property is typically covered by personal liability.
- C. The policy will not pay more than the actual damages incurred.
- D. This is incorrect; it is covered under the personal liability portion of the homeowner's policy, not the client's own property damage coverage (Coverage A or B).
Homeowner's Personal Liability (Property Damage)
The portion of a homeowner's policy that protects the insured against legal responsibility for property damage they accidentally cause to others.
- Covers damage to property of others.
- Applies anywhere in the world.
- Subject to a single liability limit for both bodily injury and property damage to others.
Memory trick: My homeowner's liability is my 'oops, I broke your stuff' fund for my neighbor.