Before looking at the types of damage it covers, let us first explain what liability insurance is.
Liability insurance can be defined as insurance taken out with an insurer in exchange for payment of a premium, under which the insurer is responsible for the costs arising from damage that the policyholder may cause to third parties, whether bodily injury or property damage.
Different types of damage may arise and may be covered by liability insurance. In this post we explain both the types of damage that may occur and which of them are covered by different types of liability insurance.
Types of Damage
Broadly speaking, there are three types of damage that may be caused by the holder of a liability insurance policy:
Bodily Injury
This refers to damage caused directly to a third party. An example would be an injury suffered by someone walking along the street who is hit on the head by an object that falls from another person’s balcony.
Property Damage
This refers to damage caused to movable or immovable property. An example would be damage inside a business premises as a result of a short circuit.
Financial Loss
When a claim occurs, this type of damage may arise; it refers to an economic loss. For example, a flood in one establishment could make it impossible for the neighbouring business to operate, causing it financial loss.
Examples of Liability Insurance
Liability insurance may vary depending on the area of activity. To understand the different covers in liability insurance, we recommend this related article:
It discusses concepts such as:
- operating liability
- products / completed operations liability
- employer’s liability
- subsidiary liability
- professional liability
- cross liability
- property-owner liability
- tenant liability
In practice, liability policies can be taken out to insure different areas:
Business Liability Insurance
From a business perspective, this insurance is designed to protect the stability of the company that takes it out, with the insurer covering the costs arising from damage caused to third-party assets during the performance of the company’s economic activity. It is not compulsory in every case, although it is recommended.
Liability in Home Insurance
Liability cover for a home is usually included in a multi-risk home insurance policy. From a personal perspective, it can be considered one of the most important covers for anyone who is a property owner, since the insurer will meet the costs arising from damage that the policyholder may accidentally or negligently cause to third parties.
Motor Liability Insurance
This is also a cover included in car insurance policies. Unlike the previous examples, this type of insurance is compulsory in order to drive a vehicle. Its purpose is to ensure that, if an accident causes damage to a third party, the insurer will assume that damage up to the limit established in the policy.
Other Examples of Liability Insurance
There are many types of liability insurance, because almost any activity may involve the risk of causing damage to a third party. There are liability policies for bicycles, animals such as horses or dogs, skiing and many other activities. From a business perspective, there are also professional liability policies for doctors, architects, engineers and other professionals.
If you need information about liability insurance, at Vida SR insurance brokerage we are at your disposal.