What is liability insurance?
This is an insurance system of risk-financing to protect the purchaser from the risks of liabilities imposed by lawsuits and similar claims. It is a type of insurance that is designed to offer specific protection against third party claims.
If you’re found to be at fault in an accident, liability coverage will help you pay for damage to another person’s property or for the costs associated with their injuries that you are responsible for.
When this happens, payment is made to the person who is suffering loss who is not a party to the insurance contract.
Investopedia defines liability insurance as “any type of insurance policy that protects an individual or business from the risk that they may be sued and held legally liable for something such as malpractice, injury or negligence.”
What types of liability insurance can you get?
Public Liability- this type of insurance covers a person, a business, an event, or a contractor, for costs from legal action if they are found liable for death or injury, loss or damage of property or economic loss resulting from their negligence.
Professional indemnity– this insurance gives protection to the professionals against any claims.
Product liability– this gives protection to the manufacturers by way of the coverage. It will cover you against any damage or injury due to products.
Liability insurance covers two key financial risks:
The legal cost of defending a claim. If you have liability insurance you can rest assured that you won’t have to pay a huge legal bill.
Compensation that you may be directed to pay the injured or the wronged party, plus their legal costs. Without liability insurance you could face the possibility of having to compensate individuals thousands of rands which you might not be able to afford.