Liability insurance protects you against the possibility of liabilities that may arise from lawsuits and other such claims. It is a part of general insurance that protects the policyholder in the event that a case is filed in court for claims that are included in the policy coverage.
At first, individuals and parties that are facing a common risk joined together in a group and put up a fund to help them in paying compensation in case any of the members suffer a loss. Thus, the system was effectively a mutual insurance arrangement.
The modern system though depends on dedicated carriers, typically for profit, to provide protection against particular perils in exchange for a premium. The design of liability insurance protects you against claims made by third parties. In general, the payment is not given to the policyholder but instead to the person who suffered a loss and is not a party to the contract of insurance.
Whenever there is a claim, the insurance provider has the right and obligation to defend the policyholder. The legal expenses incurred in the defense usually do not affect the policy limit, unless there is a stipulation in the policy to the contrary. This is a default rule that is very advantageous because legal defenses expenses have the tendency to mount up quickly if the case goes to trial.
Kinds of Liability Insurance
Business liability insurance protects you against economic losses that arise from damage or injury claims that were caused by you or your workers. However, there are several kinds of coverage that are offered by liability insurance companies. Hence, it is vital that you get a policy that will cover your particular needs. It is as crucial to know the basics of the liability coverage according to your personal circumstances.
Options In Liability Insurance Coverage
Employer’s Liability Coverage – this kind of liability insurance gives the necessary protection to employees in the conduct of their jobs. It is mandated by law that the liability policy of the employer provide sufficient coverage to the employees.
Public Liability Coverage – this type of liability insurance protects you against any damage to public property. It is crucial that you get a policy according to the kind of coverage that you need under public liability.
Product Liability Coverage – this kind of liability insurance protects you against any injury or damage resulting from the use of your product. If you are a manufacturer, this type of insurance would be best for you.
Directors and Officers Liability Insurance – popularly known as D and O, it is a coverage that is paid to directors and officers of a business to cover legal expenses and other damages, if they suffer economic losses arising from an alleged wrongful act, while performing their directors and officers functions for the company.
Personal Liability Insurance – this type of liability insurance protects you against acts of negligence that you might be legally accountable. Most people already have this coverage without their knowledge since it is often included into other kinds of coverage such as renters or homeowners insurance. However, many liability coverage included in such policies is usually limited.
Overall, different and specific liability insurance protects you against specific dangers and losses. Hence, it is up to you to determine what you need. It is very important to examine every detail of the coverage, getting legal advice is also highly recommended. One can only benefit from these systems if they know how it works and the things that it can defend them.