Liability Insurance: What Is It?
A liability insurance policy allows the policy holder to claim for compensation in cases where he or she might have to pay for any damages or injuries caused to another party for which the policy holder might be liable for.
Liability insurance policies covers losses that are the result of acts or omissions by the policy holder that are legally deemed to be of negligent nature and that results to damage to the person, property or legitimate interest of others.
Individuals and companies that dealt with a shared risk originally formed a group and created a common fund from which they could draw money from and pay for compensation if any member of the group incurs losses due to the aforementioned risks. In the present, this system now relies on dedicated insurance carriers who can offer protection against specific risks in consideration of an agreed premium between the policy holder and the insurance provider.
Liability insurance policies principally got its rapid growth from the introduction of the automobile. The risk of injuries to third parties raised the consciousness about third party liabilities that a driver can incur in cases of accidents. It now extends to a number of activities in addition to driving. These include malpractice insurance for medical practitioners, marine liability for boat owners and operators and product liability for consumer goods manufacturers.
Personal liabilities insurance policies include such policies as the Homeowners Insurance Policy, CPL (Comprehensive Personal Liability), the PAP (Personal Automobile Policy), Uninsured Motorist Endorsement, and the Personal Umbrella Liability.
When it comes to policies for business liability insurance, you’ve got a variety to choose from. First, there’s the general liability insurance for commercial businesses. There are liability insurance plans for both the workers’ compensation as well as the employers. For manufacturers and contractors, they can rely on the M&C, or what is simply known as the Liability for Manufacturers and Contractors. Tenants, owners, and builders are also protected with a certain business liability insurance. Professionals like the surgeons dentists, and anyone in the medical field can enjoy the professional liability insurance. Even storekeepers and motorists can be covered with umbrella liability policy and the coverage for uninsured motorists.
In recent practices, consumers who have had experience of malfunctioning or defective products have been increasingly active in claiming for damages from the manufacturer or producer of the product. This is readily illustrated by the recent cases where some big car manufacturers released defective car models and the recent cases of contamination found in chocolate food products released by a prominent food manufacturer. In light of this, some countries have introduced legislation that makes it mandatory for companies to include among their portfolio of insurance a liability insurance policy.
Companies are also including in their insurance portfolio insurance policies to compensate for any liabilities incurred in cases where their employees are injured during the course of their employment in the company. In most cases, the insurers are prohibited from including any conditions within the insurance policy that impose any unreasonable conditions precedent to the liability or require the insurer to take reasonable precaution or comply with current legislation and regulations. In some countries who do not impose compulsory insurance for companies for their employees, many small business have been forced into bankruptcy due to claims from employees and the companies being without any insurance policy to cover the claim.
by Maria-Goldsmith 19 years ago