What Is Liability In Insurance Coverage?

Insurance policies provide coverage for certain risks and liabilities that individuals, companies and organizations may face. Liability coverage is one type of insurance that provides protection against claims alleging that the insured party is legally responsible for someone else's injuries or property damage. Though liability coverage is typically associated with auto and homeowners insurance policies, other types of insurance policies also contain liability coverage, such as commercial general liability policies.

Types of Liability Coverage

Liability coverage is divided into two categories: bodily injury liability and property damage liability. Bodily injury liability provides coverage for any medical costs or other expenses related to physical injury caused by the insured party. Property damage liability, on the other hand, provides coverage for any damage to another person’s property caused by the insured party.

Additional Types of Liability Coverage

In addition to bodily injury and property damage liability, other types of liability coverage exist. For example, personal injury liability covers legal costs related to libel and slander suits. Personal and advertising injury liability covers legal costs associated with copyright infringement or false advertising. Lastly, medical payments coverage pays for medical costs related to injuries or illnesses regardless of fault.

Limits of Liability Coverage

Insurance policies typically specify a limit of liability coverage for each type of liability coverage. Generally, this means that the insurance company will only pay out up to the specified limit for any liability claim. If the total costs of the claim exceed the limit of liability coverage, the insured party is responsible for the additional costs.

Exclusions of Liability Coverage

In addition to limits of liability coverage, insurance policies also list various exclusions for each type of liability coverage. Exclusions are specific situations in which the insurance company will not pay out for a liability claim. For example, many insurance policies exclude liability claims resulting from the insured party’s intentional actions or from operating a motor vehicle while under the influence of alcohol or drugs.

Importance of Liability Coverage

Liability coverage is an important component of insurance policies because it provides protection against financial loss resulting from liability claims. Without liability coverage, an individual, company or organization could face serious financial losses due to the costs associated with defending a liability claim or paying out a settlement.

Choosing the Right Liability Coverage

When purchasing insurance, it is important to choose the right limit and type of liability coverage. In some cases, higher limits may be necessary depending on the individual’s or business’s level of risk. Additionally, additional types of liability coverage may be required depending on the individual’s or business’s activities. It is important to speak with an insurance agent to determine the right level and type of liability coverage for the individual or business.