What is Liability Insurance?

what is Liability Insurance

General liability insurance is the most common type of business insurance, as it covers the most basic needs that are shared among all types of companies in India.

This insurance protects individuals or organization from being held responsible for injury or damage to another person or their property.

For simple example, some customer walk into your factory and there is water on the floor and he slip and fall. Let’s assume he has injured his back. In this case customer can sue your factory for physical damages, claiming there was no wet floor sign or someone neglected and left water on the floor and I slipped on that water.

As we know, the meaning of liability is “responsibility”.

And ‘Legal liability’ means the liability that can be enforced in the court of law. There are two types of legal liabilities,

  1. Criminal liability – Enforced by the state government and punishable under the law in the form of fine or imprisonment.
  2. Civil liability – This occurs when an action is taken by one party against another party resulting in the injury or death of the aggrieved party, or damage to the property and compensation payable under the law of the land.

Types of  Liability Insurance :

1.Compulsory public liability Policy :

This insurance is for those industries which use/produce hazardous material in their manufacturing process.

In India ‘Bhopal Gas Tragedy’ prompted Government to pass compulsory public liability act in 1991.

The 1984 Bhopal gas tragedy one of the greatest environmental disasters in the World. Lethal

Gas escaped from the plant, affecting lakhs of residents of the surroundings areas. Many people were died or left permanently disabled.

Compulsory public liability policy imposes a no fault liability on anyone who handles hazardous substances to pay compensation to the victims of an accident.

2. Public liability policy

This type of policy is designed for Restaurants, Shops, Malls, pubs, cinema halls, and those companies/industries that have an interaction with the general public.

These policy covers two types of risks,

a. Industrial Risks :

This includes manufacturing premises including godowns, warehouses etc.

b. Non-Industrial Risks :

This includes Hotels, Club houses, Pubs, Restaurants, Boarding and Lodges, Cinema Halls, Auditoriums, Theatres, Public halls etc.

3. Professional Indemnities Policy :

Professional Indemnities Policy is designed for protect professionals such as doctors, lawyers, engineers, chartered accountants, architects etc. against their legal liability to pay damages arising out of their professional negligence, error or omission.

4. Product liability Policy :

The product liability policy is required for manufacturer of food products, tobacco, medicines etc.

If the use of a product causes death or injury to the consumer, then the manufacturer is liable to pay compensation.

5.Employer liability Insurance :

This policy is also called as business liability insurance. This insurance is for employers who want to cover their employee’s liabilities from injury or death because of their job.

6. Third party liability Insurance :

This policies mostly used by proprietors or small scale companies who want to cover damages caused by them to the third party. Same like automobile insurance, here third party means  organization/person who is making the claim against first party or the policy holder.

Benefits of General liability insurance to small scale companies :

Most of the policies come in all shapes and sizes. One can choose to cover a wide range of risks depending on the availability.

The sum assure by the policy is in a manner with the kind of business you are operating, business size and risks involved in the business.

Usually most of the policies cover for material damage, breakdown, Theft and financial losses due to malfunction of equipment’s etc.

Most of the insurance policies also cover things like personnel accident etc.

Policies also cover circumstances which can interrupt the business such as strikes, curfews and natural calamities.

Caliming Steps :

  1. Read the policy documents and understand how the claim needs to be filed.
  2. Visit your insurance provider nearest branch or contact them via phone
  3. In some cases you need to report to the nearest police station or concerned departments. This is mostly in cases like theft, death etc.
  4. The insurance provider visits your place to create a report and decides the compensations accordingly.
  5. Check your claim status online.

Please note that insurance claiming process varies from one service provider. Above steps gives you basic idea about claiming process.

Liability insurance providers in India:

Many insurance providers offer liability insurance in India. Some of them are,

TATA AIG Public liability policy, Bajaj Allianz Liability Insurance, Reliance public liability policy, Bharthi AXA Commercial general liability policy, Royal Sundaram public liability insurance etc.

1 thought on “What is Liability Insurance?”

Leave a Reply

Your email address will not be published. Required fields are marked *