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Liability Insurance

All About Liability Insurance: Definition, Examples, and Benefits

The definition of Liability Insurance, what does public liability insurance cover, who needs it, etc., All About Liability Insurance, find more here.

Overview #

The definition of third-party liability insurance is insurance that provides financial protection from the risk of legal liability. So, this insurance will provide compensation money if the customer gets a lawsuit from a third party.

For example, we accidentally hit someone else’s car and they demand compensation for damage to the car. In this case, the insurance will replace the money.

This insurance will guarantee legal liability to third parties in the form of bodily injury and/or property damage in connection with work or business activities carried out by the insured.

Liability Insurance

But keep in mind, the compensation money paid by insurance is not based on an agreement between us and the third party. There must be a court decision. So, you can’t just shoot nominal

Now maybe you are still wondering if you are among those who need this insurance. To understand better, let’s see the next discussion in deep on this article!

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Who needs liability insurance? #

Liability insurance is required by people who are prone to legal challenges from other parties. The following are some examples.

Who needs liability insurance No.1

insurancewhat.com – All About Liability Insurance: Definition, Examples, and Benefits

Professionals with influential positions #

Suppose you have a high position in a company, let’s call it a Director. At work, there are many big decisions that you have to make. Often these decisions run the risk of harming the company or third parties.

Not only that, it could be that your employees make fatal mistakes that cause their superiors to get sued. An example of a loss that can arise is the loss of company assets due to fraud.

So, as the highest decision-maker, you need this product that will bear all the risk of loss due to work.

Who needs liability insurance No.2

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Service provider profession #

Doctors and other medical workers can be especially prone to coming into contact with legal issues. This is because someone’s life is in their hands and if there is a work error, the problem can be brought to court.

It is important that such a large liability be covered by insurance. Therefore, there is also third-party liability insurance for the medical profession.

Who needs liability insurance No.3

insurancewhat.com – All About Liability Insurance: Definition, Examples, and Benefits

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Business Owners #

In doing business, of course, we will deal with many other parties. If there is an error in the business process and it causes a loss to a third party, it is possible for your business to be asked for compensation. Hence, entrepreneurs are one of the main customers of liability insurance.

Apart from the professions mentioned above, this product is also found in several other insurance products. For example, vehicle insurance, property insurance, and others.

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Liability insurance benefits #

Each type of insurance offers different benefits for different needs. The benefits of liability insurance include:

Liability insurance benefits No.1

insurancewhat.com – All About Liability Insurance: Definition, Examples, and Benefits

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Compensation due to losses of third parties #

This benefit is provided by insurance to compensate for losses suffered by third parties, for example, if they are injured in an accident or experience illness due to activities carried out by customers.

Compensation is given as a form of legal responsibility from the customer whose risk is transferred to insurance.

Liability insurance benefits No.2

insurancewhat.com – All About Liability Insurance: Definition, Examples, and Benefits

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Lawsuits from third parties also incur legal costs, such as court fees and court assistance costs. Generally, customers have to add premiums to get this benefit.

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Types of liability insurance #

The types of liability insurance products that exist in several countries vary greatly. The name of the product also varies from company to company. However, in general, there are three types that you can find, namely as follows.

Types of liability insurance No.1

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Personal liability insurance #

This product will provide legal liability protection for individuals. So if you are in the category of an individual who is prone to legal problems, choose personal liability insurance!

As for what will be covered in bodily injury and/or damage as well as loss of assets belonging to third parties.

Types of liability insurance No.2

insurancewhat.com – All About Liability Insurance: Definition, Examples, and Benefits

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General liability insurance #

This type of insurance targets business owners. So, insurance will cover lawsuits against the company you have. There are three types of general liability insurance on the market, namely:

Public liability Insurance (PL)

Public liability insurance is insurance that will pay compensation for company activities that harm the general public. This insurance is often used by companies engaged in oil and gas or textiles because they are vulnerable to polluting the surrounding environment.

Product liability

Product liability is suitable for business people who market risky products. For example, if you have a food factory and that product makes hundreds of thousands of your customers sick because of a production error, surely you will be sued. Insurance will help you pay compensation for those customers.

Comprehensive general liability (CGL) Insurance

Is a combined product of public and product liability.

Employer’s liability (EL) Insurance

Covering the risk of material loss or physical injury due to company activities experienced by its employees.

Types of liability insurance No.3

insurancewhat.com – All About Liability Insurance: Definition, Examples, and Benefits

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Professional liability insurance #

As we discussed earlier, some professions can also be insured, you know! For example, medical professional liability insurance covers the risk of claims for compensation faced by doctors due to errors in practice.

Another Types of Liability Insurance also includes the following:

Director’s/Employer’s and Officer Liability (DOL) insurance

Insurance that is intended to provide protection for executives and officers in the company to be free from the risk of taking their business which third parties can sue for.

Combined Liability Insurance (CLI)

Stevedoring Liability (SL) Insurance

Port and Terminal Liability (PTL) Insurance

Automobile Liability Insurance (AL)

Workmen’s Compensation Insurance


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Example of a liability insurance policy #

Each insurance company offers different product details. In order to understand more about the details, let’s take a look at the example of a Chubb insurance policy below.

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Chubb’s Broadform Liability Insurance #

This insurance is actually the same as comprehensive general liability, which is a combination of public liability and product liability. This product is suitable for those of you who have a business. The following is an explanation of the policy and the calculation of the premium.

Coverage

Chubb’s Broadform Liability Insurance product offers the following coverage.

  • Compensation for physical injury and property damage.
  • Payment of all costs arising from lawsuits.

Claim exceptions

There are several reasons that can cancel Chubb’s insurance claim, namely:

  • Aircraft damage and derivative products.
  • Contractual liability.
  • Damage to objects containing asbestos.
  • Job liability.
  • Objects that have lost their use.
  • Pollutants and radioactivity
  • Losses due to product defects.
  • Product warranties and recalls.
  • Professional liability.
  • Fines, penalties, damages, penalties.
  • Use of vehicles.
  • War.
  • Operations in the United States and Canada.
  • Property that is entrusted/leased to the insured.

Expansion

Meanwhile, if we take the expansion, we will have to pay an additional premium. Here are the expansion options.

  • Legal or attorney defense fees.
  • Compensation for ownership or driving a vehicle (there are exceptions, but with this extension it becomes void).
  • Compensation for property leased to the insured (there are exceptions, but with this extension is canceled).
  • Compensation for property and physical injury due to accidental pollution (there are exceptions, but with this extension, it is null and void).

Simulations and calculations of Chubb’s liability insurance premiums

To get protection from Chubb, you have to pay a premium of 0.15-0.6 percent of the sum insured, with the following factors:

  • Type of business
  • Total income in a year
  • Coverage limit
  • Location of coverage

Apart from premiums, there are other costs that will be charged to customers, namely:

  • Policy fee of US $50
  • US$ 6 stamp duty

To make it easier to understand, let’s look at the following simulation.

  • Customer: Your Company Name
  • Line of business: coconut juice processing
  • Annual revenue: US$ 20 million
  • Coverage limit: US$ 1 million per incident.
  • Location of coverage: industrial area, USA.

Based on this information, the premiums charged to Your Company Name are:

  • Product liability = 0.45 percent
  • Public liability = 0.15 percent
Public liability premium0,15% x US$1 millionUS$ 1500
Product liability premium 0.45% x US $ 1 millionUS$ 4500
Policy and stamp feeUS$ 50 + US$ 6US$ 56
The total premium to be paid by Your Company Name per-yearTotalUS$ 6056
All About Liability Insurance: Definition, Examples, and Benefits: Table 1 – Example of Liability Insurance Simulation

That is an example of a policy taken from a liability insurance provider. Want to research other brands? Check out the next review.

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The Conclusion #

Be careful before buying! These are the tips you need to know when choosing liability insurance

Before deciding to buy liability insurance, there are a number of things you need to do, here are among them. You can also read this article about choosing the right insurance company.

Tips Choosing Liability Insurance Company No.1

insurancewhat.com – All About Liability Insurance: Definition, Examples, and Benefits

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Company background research #

Do a little research on how the company tracks backward. Are they obedient to pay their previous customer claims?

You can get this information through the Google search engine or ask an insurance broker such as InsuranceWhat.com.

Tips Choosing Liability Insurance Company No.2

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Read the company’s financial statements #

You don’t want the insurance company we trust to experience default? Therefore, first look at the financial statements of the insurance company, is the solvency ratio above 120 percent? What about the assets they have, are they big enough?

Tips Choosing Liability Insurance Company No.3

insurancewhat.com – All About Liability Insurance: Definition, Examples, and Benefits

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Choose a product with a clear and complete policy document #

Don’t buy a cat in a sack! Understand carefully the policy that you receive before signing. If it’s not clear, ask the agent who offered it further.

This is a series of information about liability insurance. Are you still want to ask more questions? InsuranceWhat.com has a free consultation facility that you can use. To do this, please visit the InsuranceWhat.com Forum!

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Frequently Asked Questions #

The following is a list of frequently asked questions regarding liability insurance.

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Where can we buy liability insurance? #

You can get insurance through an insurance agent or directly call the call center of the insurance company you are looking for.

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What should be done when purchasing liability insurance? #

Before buying, you must read the policy carefully. Pay attention to information about what is covered and excluded, as well as when you can start filing a claim. If you don’t understand, don’t hesitate to ask the agent until you understand.

Then, also pay attention to how many claim limits are offered and important times such as the insurance period and waiting period.

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Insurance providers don’t keep their promises, what to do? #

You can ask or consult with the Financial Services Authority in your country, if there is a dispute in the insurance agreement, the following is the first action that can be taken is to ask the company for clarification. You can ask for deliberation.

If you are stuck, you can bring the case to the Insurance Mediation Agency in your country if your claim is above US$ 75,000. If it’s still not resolved, you can take the dispute to court.

Do you think you have other ideas about All About Liability Insurance: Definition, Examples, and Benefits? you can comment and share your thoughts below or discuss more in the InsuranceWhat Forum. Also, read more articles about GLOBAL INSURANCE or other interesting insurance topic articles only at InsuranceWhat.com.

By Matt Adam

Administrator and Author

Matt Adam is the founder and administrator of InsuranceWhat.com, the insurance best resources site. Learn more about him here and connect with him on the...