A key distinction is whether the mishap was due to negligence or intentional misconduct. For example, if your guest fell because a handrail was broken which you had known about but failed to repair, the insurance company may be responsible for her medical bills and any legal fees if she decides to file a lawsuit. If she fell because you pushed her, that is intentional misconduct and your liability coverage won't apply.
The basic homeowner's policy normally includes about $100,000 of liability coverage. However, increments of $300,000 or even higher are not uncommon.