Liability Insurance is a policy that offers protection to businesses and individuals from the risk that they may be held legally or sued for negligence, malpractice, or injury. This insurance policy protects the insured from legal payouts and costs for which the policyholder is deemed to be responsible. However, contractual liabilities and intentional damage are usually not covered as part of this policy.
This policy was originally created by companies or individuals who experienced common risks and hence created a fund to help pay for each other’s issues regarding this. These policies offer cover against their party claims as the payment will not be for the insured to the person who has been affected by the damage caused. In case a claim is made then the policy provider will have to defend the policyholder.
Liability insurance usually covers the cost of compensation to a third party for:
There are number of liability insurance policies available for customers based on their line of work and requirements. The most common forms of Liability insurance are Public, Product, Employers and Third-party liability, Professional indemnity.
Public liability covers the cost of claims made by members of the public for incidents that occur in connection with your business activities
Third-Party Liability, This policy covers damages caused by the insured to another. The insured is considered as the first party, the insurance company is the second and the third is the injured or the person/company making the claims.
Employer Liability, This type offers cover to liabilities that an employer may incur if an employee is injured during his/her employment due to the job. Sometimes, companies do not deem this as important but if faced with a claim, they might be driven to bankruptcy.
Product Liability, This is again not a compulsory insurance requirement in many countries, but it is highly important. This is procured by companies whose products are widely used such as chemicals, tobacco, medical products, food, recreational products, and others.
Professional indemnity covers the cost of compensating clients for loss or damage resulting from services or advice provided by a business or individual.
Directors’ and officers’ liability covers the cost of compensation claims made against your business’s directors and officers for alleged wrongful acts.