by Liability Insurance
The term liability insurance refers to an insurance product that provides an insured party with 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 is responsible for if they are found legally liable. Intentional damage and contractual liabilities are generally not covered in liability insurance policies. Unlike other types of insurance, liability insurance policies pay third parties not policyholders.
Liability insurance (also called third-party insurance) is a part of the general insurance system of risk financing to protect the purchaser (the “insured”) from the risks of liabilities imposed by lawsuits and similar claims and protects the insured if the purchaser is sued for claims that come within the coverage of the insurance policy.
Originally, individual companies that faced a common peril formed a group and created a self-help fund out of which to pay compensation should any member incur loss (in other words, a mutual insurance arrangement). The modern system relies on dedicated carriers, usually for-profit, to offer protection against specified perils in consideration of a premium.
Liability insurance is designed to offer specific protection against third-party insurance claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally as well as contractual liability are not covered under liability insurance policies. When a claim is made, the insurance carrier has the duty (and right) to defend the insured.
The legal costs of a defence normally do not affect policy limits unless the policy expressly states otherwise; this default rule is useful because defence costs tend to soar when cases go to trial. In many cases, the defense portion of the policy is actually more valuable than the insurance, as in complicated cases, the cost of defending the case might be more than the amount being claimed, especially in so-called “nuisance” cases where the insured must be defended even though no liability is ever brought to trial.
Types
In many countries, liability insurance is a compulsory form of insurance for those at risk of being sued by third parties for negligence. The most usual classes of mandatory policy cover the drivers of motor vehicles (vehicle insurance), those who offer professional services to the public, those who manufacture products that may be harmful, constructors and those who offer employment. The reason for such laws is that the classes of insured are deliberately engaging in activities that put others at risk of injury or loss. Public policy therefore requires that such individuals should carry insurance so that, if their activities do cause loss or damage to another, money will be available to pay compensation. In addition, there are a further range of perils that people insure against and, consequently, the number and range of liability policies has increased in line with the rise of contingency fee litigation offered by lawyers (sometimes on a class action basis).
Public liability
Industry and commerce are based on a range of processes and activities that have the potential to affect third parties (members of the public, visitors, trespassers, sub-contractors, etc. who may be physically injured or whose property may be damaged or both). It varies from state to state as to whether either or both employer’s liability insurance and public liability insurance have been made compulsory by law. Regardless of compulsion, however, most organizations include public liability insurance in their insurance portfolio even though the conditions, exclusions, and warranties included within the standard policies can be a burden. A company owning an industrial facility, for instance, may buy pollution insurance to cover lawsuits resulting from environmental accidents.
Product
Product liability insurance is not a compulsory class of insurance in all countries, but legislation such as the UK Consumer Protection Act 1987 and the EC Directive on Product Liability require those manufacturing or supplying goods to carry some form of product liability insurance, usually as part of a combined liability policy. The scale of potential liability is illustrated by cases such as those involving Mercedes-Benz for unstable vehicles and Perrier for benzene contamination, but the full list covers pharmaceuticals and medical devices, asbestos, tobacco, recreational equipment, mechanical and electrical products, chemicals and pesticides, agricultural products and equipment, food contamination, and all other major product classes.
Personal Accident Insurance
Personal accident insurance is a policy that can reimburse your medical costs, provide compensation in case of disability or death caused by accidents.
Accidental death If the policyholder dies in an accident then his nominee gets accidental death compensation. The family is financially secure in this situation. The compensation can vary from Rs 5 lakh to Rs 1 crore.
Permanent total disability in an accident At times, despite medical help the victim becomes disabled for life. Then the insurance policy pays a certain amount depending upon the nature of the disability. The policy also covers loss of speech, loss of vision in both eyes, and hearing loss in both ears.
Permanent partial disability This is applicable if a person has partially lost their hearing in one ear or suffered eyesight loss in one eye. Or, it could be that the policyholder has lost an index finger, a thumb, or even a hand. In all these cases, the policyholder can approach the insurer for a claim.
Transportation benefit Some insurers also grant a family transportation benefit. Say, the insured person is in a hospital outside 150 km of his home. The immediate family member will incur certain transportation expenses to reach the hospital. The insurance will reimburse these expenses up to a maximum of Rs 50,000.
Further benefits: The insurance covers other factors like education and employment benefits, and funeral expenses. You also get coverage for hospital charges, including ambulance costs. Some policies offer an educational allowance and home or vehicle alteration benefits.
Specialty Insurance
specialty insurance is insurance that can be obtained for items or events that are considered unique or special circumstances. The items that would fall in these categories are rarely covered by standard insurance policies. This could be anything from powersports vehicles to educational liability, and even specialty homeowners insurance for houses with aging roofs.
Specialty insurance plans are made specifically for businesses that need unusual coverage. These business accounts may involve high-risk holdings or could feature objects that are not usually covered under standard policies. As an example, guns and antiques are two items that require specialty insurance in order for the investment to be protected adequately.
Any type of business that serves clients who engage in high-risk behavior will have to research specialty insurance plans. For instance, a skydiving company may be considered very high risk and be subject to higher incidences of liability claims. Construction companies are another example of businesses that typically take out specialty insurance coverage. Builders are frequently sued, so specialty insurance is needed to negate the risk.
- Specialty insurance is intended to cover businesses with nontraditional needs. The construction, environmental, healthcare and energy industries are examples of specialty insurance industries.
- Quotes for specialty insurance depend on your industry and the risk your company faces of being sued. You can add an umbrella policy as a way to increase maximum payout amounts of your plan.
