Why You Need a Liability Insurance
What is liability insurance? With the sheer number of the kinds of insurance policies available, one can’t help but be confused as to which is which and what is what. Let us define liability insurance word for word. Liability is simply described as an obligation or a responsibility, while insurance is defined as the coverage enacted through a contract to guarantee against harm or loss. Combined, liability insurance is defined as a policy or insurance that protects an entity from claims made due to damages or injuries to other property or people.
In effect, liability insurance is a form of insurance that pays a third party claimant for any damages or liabilities that the first party, in this case the person who took out the insurance policy, may have caused or enacted.
This kind of an insurance is usually taken out by people or companies that may put some people at risk. Prime examples for these are employers or companies that engage in professional services that interact with the public, manufacturers of products that may be harmful and the most common one which is usually mandatory for vehicle drivers. This type of insurance is taken out when it is ascertained that the people who are covered by it are deliberately in situations that may cause some injury or harm to people around them.
Liability insurance is divided into three subclasses, namely public liability, product liability, and employer’s liability. These three cover the three main aspects of this insurance type.
Public liability is classified as a policy that covers industries or companies and even individuals who engage in acts that may endanger the general public or those within the vicinity of the said activity being enacted by the first party. A good example for this is a building or construction site on a busy area of a town or city. It would do well for the owner of the building or the firm constructing it to have liability insurance to protect them from claims made by people who might get injured by falling debris from the site or any such other injurious occurrence that may come from the construction area or vicinity.
Product liability is used to cover consumer products that may cause harm, no matter how inadvertent it may be, to the consumer. Such policies are taken out by companies that produce chemicals, pharmaceuticals, recreational equipment, and even tobacco companies. With the emergence of some lawsuit-happy individuals who easily claim injuries caused by damaged products or such things, this is one policy a lot of companies cannot afford to do without.
Employer’s liability is an insurance policy taken out by employers to protect themselves from certain eventualities should people under their employ sustain injuries while on the job. This kind of an insurance has protected many companies from bankruptcy when claims are brought up by injured employees. This policy, however, is subject to certain conditions that need to be strictly followed, like pertinent safety procedures and equipment be imposed for the general safety of the company’s workers.
by Maria-Goldsmith 19 years ago