What Is Liability Insurance?

Liability insurance is an insurance product that provides protection against claims resulting from injuries and damage to other people or property. Liability insurance policies cover any legal costs and payouts an insured party is꧒ responsible for if they are found legally liable. Intentional damage and contractual liabilities are generally not covered in liability insurance policies.

Unlike oth𓃲er types of i⛄nsurance, liability insurance policies pay third parties, and not policyholders.

How Liability Insurance Works

Liability insurance is critical for those who are liable and at fault for injuries sustained by other people or in the event that the insured party damages someone else's property. As such, liability insurance is also called 澳洲幸运5官方开奖结果体彩网:third-party insurance. Liability insurance does not cover intentional or crimi🧜nal acts even if the insured party is found legally responsible. Policies are taken out by anyone who owns a business, drives a car, practices medicine or law—b🌃asically anyone who can be sued for damages and/or injuries. Policies protect both the insured and third parties who may be injured as a result of the policyholder's unintentional negligence.

For instance, most states require that vehicle owners have liability insurance under their automotive insurance policies to cover injury to other people and property in the event of accidents. A product manufacturer may purchase product liability insurance to cover them if a product is faulty and causes damage to the purchasers or another third party. Business owners may purchase liability insurance that covers them if an employee is injured during 💞business operations. The decisions doctors and surgeon𒁏s make while on the job also require liability insurance policies.

Special Considerations

Personal liability insurance policies are purchased primarily by high-net-worth individuals (HNWIs) or those with sizeable assets, but this type of coverage is recommended to anyone with a 澳洲幸运5官方开奖结果体彩网:net worth that exceeds the combined coverage limits of other personal insurance policies, such as home and auto coverage. The cost of an additional insurance policy does🌌n't appeal to everyone, although most carriers offer reduced rates for bundled coverage packages. Personal liability insurance is considered a secondary policy and may require policyholders to carry certain limits on their home and auto policies, which may result in additional expenses.

Although commercial general liability insurance protects against most legal hassles, it doesn't protect directors and officers from being sued, and it doesn't protect the insured against errors and omissions. Companies require special policies for these cases including:

• Errors and Omissions Liability Insurance (E&O): An errors and omissions liability insurance policy covers lawsuits arising from negligent professional services or failing to perform professional duties. Lawyers, 澳洲幸运5官方开奖结果体彩网:accountants, architects, engineers, or any business providing a service to a client for a fee should purchase this form of insurance. An E&O policy does not cover criminal prosecution, fraudulent or dishonest acts, or claims against bodily injury. The insured, however, is covered for attorney fees, court costs, and any settlements up to the amount specified by the insurance contract.
• Directors and Officers (D&O) Insurance: This type of policy protects directors and officers of large companies against legal judgments and costs arising from unlawful acts, erroneous investment decisions, failure to maintain property, releasing confidential information, hiring and firing decisions, 澳洲幸运5官方开奖结果体彩网:conflicts of interest, 澳洲幸运5官方开奖结果体彩网:gross negligence, and other errors. Most D&O policies exclude coverage for fraud or other criminal acts. Premiums depend on the company, its location, industry type, and loss experience.

Types of Liability Insurance

Business owners are exposed to a range of liabilities, any of which can subject their assets to substantial claims. All business owners need to have an 澳洲幸运5官方开奖结果体彩网:asset protection plan in place that's built around avai♛lable liability insurance coverage.

Here are the main types of liability insurance:

• Employer’s liability and 澳洲幸运5官方开奖结果体彩网:workers' compensation is mandatory coverage for employers which protects the business against liabilities arising from injuries or the death of an employee.
• Product liability insurance is for businesses that manufacture products for sale on the general market. Product liability insurance protects against lawsuits arising from injury or death caused by their products.
• 澳洲幸运5官方开奖结果体彩网:Indemnity insurance provides coverage to protect a business against negligence claims due to financial harm resulting from mistakes or failure to perform.
• Director and officer liability coverage cover a company's 澳洲幸运5官方开奖结果体彩网:board of directors or officers against liability if the company should be sued. Some companies provide additional protection to their executive team even though 澳洲幸运5官方开奖结果体彩网:corporations generally provide some degree of personal protection to their employees.
• 澳洲幸运5官方开奖结果体彩网:Umbrella liability policies are personal liability policies designed to 澳洲幸运5官方开奖结果体彩网:protect against catastrophi𝐆c losses. Coverage generally kicks in when the liability limits of other insurance are reached.
• Commercial liability insurance is a standard 澳洲幸运5官方开奖结果体彩网:commercial general liability policy also known as comprehensive general liability insurance. It provides insurance coverage for lawsuits arising from injury to employees and the public, property damage caused by an employee, as well as injuries suffered by the negligent action of employees. The policy may also cover infringement on intellectual property, slander, libel, contractual liability, tenant liability, and employment practices liability.
• Comprehensive general liability policies are tailor-made for any small or large business, 澳洲幸运5官方开奖结果体彩网:partnership or joint venture businesses, a corporation or association, an organization, or even a newly acquired business. Insurance coverage includes bodily injury, property damage, personal and advertising injury, medical payments, and premises and operations liability. Insurers provide coverage for compensatory and general damages for lawsuits but not punitive damages.