The essence of liability insurance is the protection of the insured person from paying the losses made to the third parties. Liability insurance is very popular in the USA. Legislation concerning liability is deeply studied by American lawyers. Insurance professionals developed a so-called “doctrine of negligence” that allowed to define the terms used in the industry more clearly and assess the propensity of people to risk.
In the USA responsibility is insured in mandatory and voluntary way. For example, you cannot obtain a license for security activity without providing an insurance policy that confirms the availability of security guard’s $25000 liability insurance.
Liability insurance covers the following types of damage
- property damage – the cost of repair to restore the property and a set of related expenses;
- personal damage – the cost of treatment, the costs associated with the increase of needs, for example, hiring a nurse;
- moral damages – compensation for the suffering;
- claims of indirectly affected parties.
Note that the liability insurance protects you from the risks of lawsuits for negligence. What is important, it doesn’t shield from liability for criminal actions made by the insured person. If it was this way the criminals would have a chance to benefit from their illegal actions and the crime would be promoted to a certain degree. Indeed, it’s a nonsense to protect criminals from the negative impact of their own wrong actions.
The types of liability insurance
1. Public liability. A great deal of human activities is potentially dangerous with regard to third parties. Every state decides independently what kind of insurance should be established as compulsory – public liability insurance or employer’s liability insurance. No matter the compulsion the majority of businesses purchase public liability insurance even if it may intersect in some ways with insurance policies the company already has. But there are examples when business, especially a small one, doesn’t purchase neither professional nor general liability insurance explaining it by the need to pay high premiums. It’s not a sound justification at all since sometimes the claim costs may put an end to the entrepreneurial activity. The most advisable solution is to perform and audit of potential perils and determine an appropriate amount of coverage.
2. Product liability insurance is not a must but still required in some cases. Commonly it comes as a component of a combined liability policy. The entire rundown comprises such product classes as chemicals, medical devices, tobacco and asbestos equipment, etc.
3. Employers liability insurance is designed to protect an employer from any liability if an employee is injured during the period of employment. In the USA the Workers’Compensation insurance is mandatory but if an employer shows the ability to self-insure due to a perfect financial capabilities it may be cancelled.
4. Third-party liability insurance protects the insured person against the potentially harmful actions of third parties.
There is also a general liability insurance that provides coverage to both public and product liability risks. General liability insurance is represented by Commercial General Liability policy purchased by companies as well as by homeowners insurance policies.
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