If a guest is injured on your property and files a lawsuit against you, would your homeowner's insurance protect you financially? Nobody wants guests to get hurt on their property, but accidents happen. Personal liability insurance on your homeowner's property shields you financially against the consequences of a lawsuit by covering legal fees and the amount of the settlement or judgment. While carrying personal liability insurance is important for every homeowner, there are a few circumstances in which you should increase the amount of your coverage. Below are three circumstances in which it's a good idea to carry a large amount of personal liability insurance on your homeowner's policy.

1. You Own a Dog 

Dog bites are a common source of personal liability claims. While your dog may have never bit anyone, you always take a risk when you invite guests into your home. Some people are too rough with dogs or push them too far, which can result in a bite that you will be liable for. If you own a dog, you should definitely carry personal liability insurance on your homeowner's policy.

Read your homeowners policy carefully, as some policies do not cover every breed of dog. Some dog breeds, such as pit bulls, are often not covered by personal liability insurance. The reason for this is that these breeds have been found to bite guests more frequently than other breeds. You may be able to purchase special coverage for these breeds from your insurance carrier.

2. You're Installing a Pool

You should always consider increasing your personal liability limit whenever you install a pool, whether it's an in-ground pool or an above-ground pool. The surfaces around the pool are often slippery, which can cause your guests to slip and fall. Roughhousing in the pool is another potential source of injury. Since your guests have a greater chance of being injured in and around the pool, it's a good idea to increase your personal liability limit in order to protect yourself.

3. You Frequently Host Guests

If you often throw parties and host numerous guests, you should carry a higher personal liability limit on your homeowner's insurance policy. The simple reason is that more guests in your home mean there's more opportunity for one of them to injure themselves on your property. Hosting parties may be fun, but it does open you up to potential lawsuits from injuries sustained on your property.

This is especially important if you're serving alcohol to your guests – in some cases, you can be held liable when an injury occurs after you serve too much alcohol to a guest in your home. If you allow guests to drive home after drinking and they're in an accident, you may also be held liable. Increasing your personal liability limit helps to shield you from the financial consequences of this liability.

Few people like to think of the possibility that guests will be injured in their home. Even fewer like to think of the possibility that their guests will file a lawsuit against them as a result of their injury. If it occurs, however, you will be glad that you are carrying personal liability insurance on your homeowner's policy. When you need to upgrade your liability limit, speak to your insurance carrier and discuss the coverage limits available to you.