Liability Insurance - Is It Important To You?

Liability insurance protects the insured from lawsuits and damage claims

. The insured party purchases this type of insurance in the event that he or she is sued in court. Originally companies and individuals formed mutual insurance alliances that would be in place to pay claims should any of the members of the alliance suffer losses. In our modern insurance system, this form of insurance is issued by a carrier who collects a premium for protection against losses. Typically, payment is made not to the insured, but to the party, not associated with the insurance contract, who suffers a loss. Liability insurers have the responsibility to cover and defend the insured.

Who might require liability insurance? Almost anyone at risk for being sued for damages due to negligence can benefit from having this coverage. It can be an individual or a business. For example, it would be anyone who drives a car, those who provide professional services to the public, manufacturers of products that may carry a risk of any sort. Also, it would include contractors and companies that employ personnel. All of our industries and commerce involve activities that have the potential for harm to a third party. This can take the form of physical injury, property damage, or both.

There are several different types of coverage for liability. Public liability insurance is standard for owners and operators of businesses frequented by large numbers of the general public. Shopping centers, clubs, sport arenas, hotels, and any place that alcohol is served are examples of businesses that would purchase this coverage. Product liability is another type of insurance. Any company providing a product for public consumption has potential liability. Employers usually carry another type of coverage in case an employee is injured while performing his or her job. Workers' compensation protects the employer from claims that might be large enough to damage or destroy their business. Professional liability, similar to malpractice insurance, is widely used today by the technology industry. Some of these coverages can be grouped together in a general liability policy.

Normally, insurance does not protect against damages as the result of intentional illegal activities committed by the policy holder. The insurance industry recognizes that individual criminals and organized crime groups should not be allowed to insure themselves against suits brought on by victims of their crimes. Individuals, however, may obtain coverage to pay for one's losses as the result of being a victim of crime. Everyone should consider their own circumstance and consult a professional regarding the coverage that best suits them.

by: Troy Truman

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