Liability cover is a kind of insurance cover. Any occurrence that a person is responsible for is called liability. Insurance promises compensation to an individual for unpredictable losses that may occur in the future. The individual makes fixed payments periodically for the promise. The firm that gives this kind of promise is known as insurer. The individual who pays for this promise is known as the cover holder.
There are many forms of insurance. Some are statutory while others are optional. A person seeking insurance chooses the type of insurance he requires. What he chooses is called insurance cover. When a person chooses a cover against liability he is covered against property damage or personal injury to a third party.
Third party here means someone else other than the insured. So, any payment for injury or damage is not made to the person who is insured. It is made to the affected person though he is not party to the insurance contract.
Personal injury to a third party may include disability and injury among others. For example if a shopper slides and injures his leg in a shopping mall, he can seek compensation from the owner of the mall. Property damage suffered by a 3rd party includes physical loss or damage and others. For instance if your car hits another car and damages it, the owner of the car you have hit will demand compensation from you.
A liability policy protects the policy owner in 2 ways. Costs of any law suits against the cover holder are paid for by the cover. If the court awards a 3rd party compensation, all monies the policy holder is held liable for are settled by this insurance cover. It pays up to the maximum limit set by the policy.
Many countries require those who risk being sued by third parties for negligence to take liability insurance cover. These people include drivers of vehicles, manufacturers, constructors and employers. The activities they engage in put other people at risk of loss or injury. The law requires them to be covered against liability so that if anything happens, money will be readily available to compensate the affected people.
Liability cover is optional. However, home owners, business owners and other people could give it a thought. People are increasingly discovering their civil rights. Being taken to court for negligence is therefore easy. Although it is not possible to stop or predict risks, transferring them to an insurance company can be more comforting.
Liability cover and income protection redundancy are sometimes mandated by law, but may also be optional. Protect yourself against future losses by reviewing and managing your insurance coverage prudently.
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