Liability insurance is designed to protect individuals or corporations when they are at fault for an accident or loss. When a loss occurs, the injured party files a claim with the insurance company who insures the at-fault party. Losses can be in the nature of personal injury, property damage or other loss. Liability insurance, subject to a limit of coverage, provides compensation to the injured party, not the at-fault party. The at-fault party is commonly called the policyholder, who purchases limits of liability insurance through premiums. This contract forms the basis of the insurance policy. The following are five common types of liability insurance.
Private Liability Insurance
Anything owned by a private individual that has general exposure to the public can be insured through liability insurance. An individual can purchase liability insurance for automobiles, motorcycles, homes, boats and renters. For example, if a motorcyclist is found negligent in the operation of a motorcycle, and someone is personally injured as a result, the injured party can file a claim under the motorcycle’s liability insurance for monetary compensation.
Public Liability Insurance
Businesses purchase liability insurance for their own organizations, such as supermarkets, bars, restaurants and retail establishments. If a patron becomes injured while visiting a business, the injured party can file a claim under the business’s liability insurance. As with private and other types of liability insurance, if the injured party files a lawsuit against the business, the insurance company, based on policy terms and conditions, will provide a legal defense and pay for the legal costs associated with handling the lawsuit.
Product Liability Insurance
Businesses and manufacturers purchase product liability insurance to insure them when a product causes a specific damage. Generally, there are two kinds of claims--product design defects and inadequate warning instructions. Both claims are compensable under the business’s liability insurance.
Professional Liability Insurance
Professionals, such as attorneys, accountants and doctors, purchase professional liability insurance to insure against a failure to perform or deliver services according to reasonable standards of care. For example, if a surgeon makes a mistake during surgery, the patient may file a claim against the physician or medical provider for the injury that was caused. In turn, the injured party may collect compensation under the professional’s liability insurance.
Employers Liability Insurance
Employers purchase liability insurance to insure them when an employee is injured on the job. For example, if an employee slips and falls to the ground because of a possible unsafe condition on the premises, the employee may file a claim under the employer’s liability insurance for compensation of injuries.