Liability Insurance

If someone is held legally responsible for harm to another person or their property, they may have to pay compensation and legal costs, which can be very large. Liability insurance pays these costs, up to the policy limit.

There are many types of liability insurance. Personal liability cover is often included in home insurance policies. Motor insurance includes liability cover for injuring others or damaging their vehicles, which is compulsory in most countries. Businesses buy public liability insurance for injuries to customers and the public, product liability insurance for harm caused by their products, employers' liability insurance for injuries to staff, which is compulsory in some countries, and professional indemnity insurance for mistakes in professional advice or services.

For example, if a customer slips on a wet floor in a shop and breaks their wrist, the shop's public liability insurance would cover the customer's compensation claim and legal costs.

Liability insurance does not cover the policyholder's own losses, only claims from third parties. It also usually excludes intentional harm and criminal acts. Because legal claims can be extremely expensive, businesses and professionals often consider adequate liability cover essential.