This element contained within a standard homeowners insurance policy protects you against legal action towards you due to injuries or damage taken by third parties on your property. It will also cover you in case the injury or damage was caused by your pet. This coverage will pay out both the legal costs and the damages to the other party if the court rules to do so.

The typical homeowners insurance policy carries a $100,000 minimum of liability insurance, but you are always free to increase this amount. Most insurance experts recommend considering an amount between $300,000 to $500,000 in order to be fully protected in case of liability.

Liability coverage carried by your policy should be enough to protect the most important assets. If your property or belongings exceed the liability coverage limits in their value it is highly recommended to get excess liability policy (also known as umbrella policy).

Excess liability or umbrella policies deliver additional coverage when required. They kick in after you exceed you policy's ordinary liability coverage limits. But keep in mind that this type of coverage doesn't make part of a standard homeowners insurance policy and has to be bought separately. Besides providing you with additional coverage, umbrella policies also broaden the coverage itself, protecting you in cases of privacy invasion, slander and libel. A standard homeowners insurance doesn't cover you in such circumstances.

The price you will have to pay for an umbrella policy is determined by your risks and by the coverage amounts carried by your basic policy. The higher is the amount of coverage included into the basic policy, the less expensive your umbrella policy will turn out to be, because it will be less likely to be used. The majority of insurance companies require a minimum amount of $300,000 carried by your policy in order to get an umbrella policy.

Other important assets:

1. Your property
2. Your personal belongings
3. Expenses due to your home being damaged
4. Personal liability towards other parties