Definition of Liability Insurance: The simplest definition of ‘liability insurance’ is the Insurance coverage to protect against claims alleging that one’s negligence or inappropriate action resulted in bodily injury or property damage.

Liability coverage pays when the insured is legally liable for the negligent act. Different people/ organizations  need different types/ amounts of liability coverage.

Personal vs Commercial Liability: Personal liability insurance provides coverage for individuals while commercial liability provides coverage for a business entity. A 4-door sedan car needs personal auto liability policy. Personal Liability Protection normally comes in personal policies such as Personal Auto Policies (PAPs), Homeowners Insurance Policies, boat policies, and  Personal Umbrellas. These coverages pay for damages that the Insured causes to the bodily injuries, personal injuries, property damages, legal defense in connection with claims brought against the Insured.

Business/ Commercial Liability Protection: Comes to cover businesses and/or individuals in connection with their business conducts.

Premises Liability applies when someone other than the insured or insured’s employees sues the business for damages due to an injury sustained in business premises. Product Liability includes liability protection for business completed products or services. Professional service businesses such as physicians, lawyers, real estate brokers, and insurance agents have special professional liability coverages.

Professional Liability. Employer’s Liability provides coverage for employees during their employment. Garage Liability applies in situations where a business deals with vehicles owned by others. Garage Keeper Liability provides comprehensive and collision coverage on vehicles NOT owned by the business while the vehicles are in possession of the business. Auto service stations, valet parking businesses, towing services, and car washes are examples of businesses that need garage liability and garage keeper liability protection. In the case of Excess, the policy will pay for damages of vehicles of the clients of the Insured only if the Insured is negligent.

It pays for damages of the properties hauled in the event the Insured is liable for the damages.

Some commercial liability insurance policies are written on Claim Made Basis. Most professional liability policies are written on Claim Made basis. CSL or Combined Single Limit policies allow insurance companies to combine both bodily injury liability and property damage liability insurance under a single limit. The insurance company would pay up to the stated limit on a third party claim regardless of whether the claim was for bodily or property damage. In Split Limit policies, the policy would break down limits to, for example, bodily injury limit per person and bodily injury limit per accident and property damage per accident.

General liability insurance, therefore, becomes a necessity for most companies. General liability insurance can be bought independently or as part of a BOP (Business Owners Policy). A Business Owners Policy packs liability and property insurance into a single policy. The liability insurance coverage limits, however, are usually quite low. Businesses needing a greater coverage usually buy liability insurance as an independent policy.

In a general liability insurance policy, legal costs of a business in a covered liability lawsuit have to be paid by the insurer. Covered liability claims include property damage, bodily injury, personal injury and damages from false advertising, also called advertising injury. Insurance companies also cover general and compensatory damages. However, liability insurance policies do not cover punitive damages, as they are deemed punishment for deliberate actions.

General liability insurance policies always declare a maximum amount that insurers have to give during the policy period. It covers payments that go beyond the company’s policy’s limits and gives extra protection for liabilities not covered in the standard insurance policy.

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