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Liability cover is a type of insurance policy. A liability is anything you are responsible for. Insurance is a promise to compensate a person for potential future losses. The person pays a fixed amount of money for this promise periodically. The company giving the promise is called an insurer. The individual paying for this promise is called the insured person.

Insurance is of many types. While some are optional others are statutory. An individual looking for insurance selects insurance according to his requirements. What he selects is referred to as insurance policy. When an individual selects a policy to cover him for liability, he is protected against personal injury and property damage to a 3rd party.

In this context, 3rd party refers to another person and not the policy holder. Therefore, any compensation for damage or injury is not paid to the cover holder. Compensation is made to the victim despite the fact that he is not the owner of 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.

In a large number of countries, individuals who risk being sued because of negligence by third parties are expected to take a liability policy. Constructors, vehicle drivers and employers are included in this group. This is due to the fact that the activities they involve themselves in expose others to losses and injuries. They are expected by law to protect themselves against liability so that if anything happens, money for compensation is readily available.

Liability cover is not compulsory for everybody. It is however something worth considering by business owners, home owners and others. People are becoming increasingly aware of their legal rights. It is therefore easy to be sued for negligence. Though you may not predict or stop the risks, you can at least transfer them to an insurer.

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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