ImageLiability Insurance – What it is, How it Works, Coverages and Types

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  • > Quick Guide to Liability Insurance Policy
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The Benefits of Liability Insurance Policy

Product Features

Pays for any litigation cost against any official or key employee. Protects directors and other key executives from various litigation costs. Necessary to embolden executives to work without fear of any kind of litigation. Covers any kind of litigations.

Professional Indemnity

Pays for litigation related to alleged negligence in service. Relevant for all services companies and individual professionals such as doctors, architects and chartered accountants. Conduct your business without worrying about acrimonious litigation.

Comprehensive General Liability

Pays for third party claims in your premises or claims due to your products. Covers both public and product liability. Public liability covers litigation by third parties hurt on your premises. Product liability covers damages caused by products that you manufacture.

Specific Liability Risks

These insurances are specific to select industries. Carrier Legal Liability protects fleet owners and transporters. Cyber Risk most applicable to companies dealing in online customer information. Commercial Crime relevant to financial services companies amongst others.

Quick Guide to Liability Insurance Policy

What is Liability Insurance?

Liability insurance protects people and businesses if they get sued for causing loss or damage due to negligence or accident. It covers legal defence costs and pays the claim made by the victim if the insured is found responsible.

Almost all businesses regardless of industry or size benefit from liability insurance. Besides, individuals such as home and automobile owners, professionals, landlords, event organisers, contractors and construction companies and public entities such as government agencies and municipalities typically buy liability insurance.

There are various types of liability insurance, and the limits, premiums and coverage vary from business to business.

Legal cases can be expensive without liability insurance and harm a business' finances. Liability insurance gives peace of mind because there is always a backup in case of a lawsuit or claim. However, criminal prosecution and contractual liabilities are not a part of this insurance. Intentional damage is also not included in the policy. High-net-worth individuals opt for liability insurance as a safety net.

How does liability insurance work?

Liability insurance protects businesses and individuals from legal claims. It covers defence charges and the amount paid to the injured party. It's a good option for protection, but it's important to understand the terms, coverage limits, and insurance agreements. Premiums are fixed based on the risk profile and coverage limits.

If the insured party is responsible for an incident, they can benefit from liability insurance. It covers unintentional injuries, damages, or other losses to businesses or individuals. In such cases, they can file a claim and become eligible for compensation.

The insured party has to submit the policy documents to the insurance company. Once this gets done, the investigation starts. The investigation and legal proceedings are crucial. After its completion, there is a settlement between the insured and the injured party.

Remember, each policy has a maximum limit. It means the highest amount the insurance company will cover. The limit depends on the type of insurance one opts for. Criminal activities and intentional acts are not covered by liability insurance.

Types of Liability Insurance in India

Businesses or individuals can choose many liability insurance types in India. Here are a few types of liability insurance:

  • Public Liability Insurance - Many businesses, including those in manufacturing, retail, hospitality, and construction, find public liability insurance a good fit. These industries commonly use it to cover legal liabilities. It could be as a result of property damage or damage to business operations.

  • Professional Indemnity Insurance - This insurance is designed for individuals who provide services to their clients, such as doctors, engineers and consultants. It allows them to cover claims due to errors or negligence.

  • Product Liability Insurance - As the name suggests, it covers manufacturers, distributors or sellers. It is for the claims that arise because of damaged products. It may also result from the casualty caused by their products.

  • Directors and Officer's Liability Insurance – D&O liability insurance protects directors and officers from lawsuits and claims for their actions and decisions that may have caused damage or financial losses. The insurance may also cover top executives and other employees of the organization.

  • Cyber Liability Insurance – Cyber liability insurance protects businesses from financial losses due to cyber incidents. It covers expenses like legal fees and investigation costs. It helps businesses recover from data breaches or cyberattacks.

  • Employer's Liability Insurance – This insurance covers the employers against injuries or damage caused to them. The harm may be due to negligence in safety at the workplace.

Who should buy Liability Insurance?

Liability insurance is vital for businesses that are at risk of causing damage. Both small and large businesses can benefit from this policy. It protects them from legal claims resulting from accidents or damage. They can occur due to oversight in manufacturing facilities or products.

Professionals like lawyers, engineers, accountants and consultants should opt for this insurance. It will help them to get coverage if they make any errors. Also, it covers the omissions or wrongful acts in their professional services. Liability insurance is helpful in the contractor industry, where liability claims due to workplace accidents are more likely.

Event organisers can be protected from damage, injuries, or accident claims. Property owners can avoid claims related to accidents on their premises. Nonprofit organisations can also benefit from this insurance. It provides peace of mind to individuals and businesses, ensuring they don't suffer accidental losses. Having the right insurance coverage helps in the long term.

What are the features of liability insurance?

Liability insurance policies get tailored to the requirements of the businesses. Different professions need liability insurance to avoid claims by injured parties. Here are some standard features of liability insurance:

Liability insurance covers legal defence and all expenses related to a lawsuit. Be it attorney fees or court fees, everything gets included.

In the case of an injury on your business premises or due to your actions, liability insurance covers medical expenses and compensation if in case the victim files a claim.

Suppose there's damage to the property of any third party because of your business. The insurance covers property damage, repair charges and vehicle repair charges.

The policy covers non-physical injuries like an invasion of privacy and false advertising. Furthermore, it also covers copyright infringement. If someone files a claim because your business advertised a false statement, liability insurance can assist in such situations.

When manufacturing, selling, or advertising products, there is a risk of causing harm to others. In such cases, customers can file a claim. Liability insurance covers these claims, ensuring the costs are covered.

What gets covered under Liability Insurance?

Liability insurance offers coverage in case anyone files a claim against you. The case may be against you or your business for causing harm. Know that the extent of coverage and protection depends on the insurance provider. Also, it depends on the type of policy you are opting for.

Before choosing a liability insurance policy, consult an insurance professional to know which suits you. Different policies arrive with different coverage limits. Here are a few things that insurance liability covers:

  • Body Injured Costs - Covers medical expenses along with rehabilitation costs. It may also provide compensation for pain and loss.

  • Property Damage - Covers expenses if there is damage to the property of a third party. Replacement costs and repairs get covered under this too.

  • Personal Injury Coverage - Offers coverage against non-physical injuries. They include defamation, copyright infringement or slander.

  • Professional Liability –Protects professional negligence and errors of professionals. It includes doctors, engineers, lawyers, accountants and other service providers. Employment-related claims such as discrimination at workplace, wrongful termination, and sexual harassment, are part of the policy coverage

  • Legal Defense – Liability insurance pays for attorney fees, court fees, and settlement costs. It covers legal defence expenses if a third party files a claim.

  • Pollution Liability – Liability insurance not only provides coverage for third-party bodily injury and property damage but also extends to incidents of environmental pollution, ensuring comprehensive protection for businesses and individuals.

What is not covered under liability insurance?

Liability insurance provides coverage for different types of claims but also has limitations. Reviewing the policy in detail is crucial to understand what is excluded. Here are some common damages/situations not covered by liability insurance.

Intentional acts or deliberate wrongdoings are not entertained under this policy. Instances are vandalism and assault. These do not get coverage.

Liability insurance does not cover liabilities or claims related to criminal or illegal activities. These include money laundering, the use of controlled substances, and fraud. If charges are brought against you in such cases, the policy will not provide coverage.

The policy does not cover contractual obligations like a breach of contract. If an individual or a business fails to meet the agreement, they won't be covered.

Damages or incidents that are intentionally caused or expected by the insured party. The policy does not support deliberate or anticipated actions; no coverage is provided in such situations.

What are the eligibility criteria for liability insurance?

The requirements for eligibility for liability insurance can differ depending on the provider. The type of liability insurance is also an aspect. However, there are common factors that insurers consider when assessing eligibility.

  • Business Entity - Liability insurance is available for business entities, including sole proprietorships, partnerships, limited liability companies (LLCs), and corporations.

  • Industries - High-risk industries like construction, aviation, or hazardous materials handling have unique policies and terms. They may need specialised liability coverage and have different eligibility requirements.

  • Claims History - Insurance companies will review your claims history. This step is to assess your risk profile. If you have a history of frequent or significant claims, it may affect your eligibility.

  • Risk Management Practices –Insurers may test your risk management practices and safety measures. Businesses with risk strategies, safety protocols and employee training programmes are a benefit. Such measures reduce the likelihood of accidents. These incidents may get viewed better by insurers.

  • Financial Stability – Financial stability is essential to ensure that you can meet financial obligations. Deductibles or self-insured retentions are some examples of financial stability. These are essential for insurers so they can grant you the policy for insurance.

How is the Liability Insurance Premium Decided?

The liability insurance premium gets decided by various factors of the insured. These factors vary from company to company. Here are some general aspects that every company follows.

Insurers assess the risk associated with the insured's operations, activities, or profession. Business size and location are some relevant factors. Also, the type of business and industry regulations are taken into consideration.

The insured party can select higher coverage if they desire more financial protection. They choose the coverage amount and determine the maximum payout the insurance company will provide.

Certain professions in the industry naturally have a higher risk profile. It is why the insurer goes through the experience and qualifications of the insured party to check for credibility.

The higher the revenue or payroll of a business, the higher its value will be. Big-size businesses can get good deals on premiums because of their financial position.

Geographic location is considered when determining insurance eligibility. Some areas have a higher risk of accidents. Additionally, each insurance company has its criteria for approving policies. For example, premiums and coverage limits are based on individual circumstances.

How to Raise a Claim under Liability Insurance?

Raising a claim under liability insurance is easy. You must know all the steps and contact your policy company for their rules. Here are some points to remember:

As soon as the incident takes place, ensure that you inform your insurance company about it. Every insurer has a specific procedure for the claim, so that the first step would be transparency.

Have all the necessary reports ready with you -- police reports, incident reports and all relevant information. Keep them ready for the insurance company to review.

To make a strong case, you need correct documentation. Legal notices, incident notes or any other document that may be helpful should be with you before you inform the insurance company.

You should cooperate fully with the insurance company during the claims process. They may appoint a claims adjuster to investigate the incident and evaluate the validity and extent of the claim.

If any instructions are given to you by your insurance company, ensure that you follow them. Be it claim forms or completing other formalities, be up to date to make the process smooth.

Documents Required for Liability Insurance Policy Claim

The documents needed for a policy may vary for various companies. However, there are a few basic documents that are common for all policies:

  • Claim Form - In this form, the insured needs to write the tiniest detail related to the incident. Information such as date, location, time, description and parties involved is necessary.

  • Supporting documents like photos, videos of the incident, and police reports are crucial. Witness statements, medical records and repair estimates are necessary for filing a claim.

  • Include all the details of the policy you opted for. Mention the policy number and coverage limits, and other necessary information. Keep the proof ready that you are eligible for coverage.

  • If the incident caused financial losses, have the necessary proof with you. Be ready with financial statements, tax returns and other relevant financial documents.

  • If legal action is already taken, be ready with relevant documents. These include demand letters, court filings and legal notices. Such information allows the company to understand the situation completely. Also, they can move forward with the process and give you the help you need.

Companies Providing Liability Insurance Policy in India

Here are a few companies that provide liability insurance policies:

  • National Insurance Company Limited
  • New India Assurance Company Limited
  • United India Insurance Company Limited
  • ICICI Lombard General Insurance Company Limited
  • HDFC ERGO General Insurance Company Limited
  • Bajaj Allianz General Insurance Company Limited
  • Tata AIG General Insurance Company Limited
  • Bharti AXA General Insurance Company Limited
  • Reliance General Insurance Company Limited
  • IFFCO Tokio General Insurance Company Limited

Before choosing any company, do extensive research about their reputation. Know their success rate and customer service to make the best choice.

How to Buy or Renew Liability Insurance Policy from Secure Now?

Secure Now is a leading insurance provider in India which offers liability insurance. Applying for it is a simple process with no hassle.

Evaluate your specific liability insurance needs to determine the coverage limits required. Familiarise yourself with the different types of liability insurance. Then, find the one that best suits your requirements.

Provide accurate information about your business, profession, or activities to get accurate quotes. Be transparent throughout the process to get deals that will benefit you.

Before choosing any coverage limit, go through the guidelines with great attention. Look at coverage terms, deductibles, exclusions as well as policy features.

Fill out the application form and submit all the necessary documents. Once the company reviews your documents and forms, you will have a premium in no time. Cooperate with the company throughout the underwriting process.

To get the policy renewed, contact the insurance company. Do this before the expiry date so they can update your information.

Frequently Asked Questions

Litigation in India is quite common, with tens of thousands of cases filed annually across various courts and tribunals.
Legal costs in Liability Insurance can vary depending on the essence and complexity of the case. But, they can be significant, often requiring substantial financial resources.
The jurisdictions to be covered in Liability Insurance should typically include the areas where the insured operates or where potential liability claims may arise.
As a sole trader, liability insurance is highly recommended to protect against potential claims or legal liabilities arising during business activities.
Umbrella insurance provides a supplementary layer of liability coverage beyond the limits of other primary insurance policies, offering broader protection against various risks and higher coverage amounts.
Various companies across industries purchase commercial liability insurance, including manufacturing firms, service providers, retailers, contractors, and professional service firms, among others.
In 'right to defend' insurance, the insured can choose their legal representation and control the defence strategy. In 'duty to defend' insurance, the insurer must provide and manage the defence on behalf of the insured. The specific terms are defined in the insurance policy.


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Value-Added Services

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