What Liability Insurance Protects Against: Home, Auto, Professional and Employer Coverage

Liability insurance is something we cannot escape. From your car to your home, even to your job, it is important to protect your interests in case you make a mistake and have an accident. If someone slips and falls at your house, or if you rear-end someone on the highway during your morning commute, liability insurance provides invaluable protection for your personal finances.

But what exactly does liability insurance protect against? In what circumstances will this type of insurance come into play?

Car Accidents

Auto liability insurance protects against damage you cause to people or property if you cause an accident. For example, let's say you're driving down a poorly-lit winding road, and you misjudge a curve. You drive up into someone's yard and hit the side of their garage. Auto liability insurance would pay to replace what you damaged.

When it comes to car insurance, liability takes two basic forms: bodily injury and property damage. The former covers damage you cause to another person, such as the driver of a car you hit or, in the worst-case scenario, a pedestrian. Property damage covers property owned by others in an accident, such as other cars, light poles and anything else.

Auto liability insurance does not protect against your own property. In other words, if you only carry liability car insurance and you get into an accident, the insurance company is not going to pay to fix the damage to your own vehicle.

Home Accidents

Liability insurance protects against damage you cause to other people or property at or around your home. Typical policies include $100,000 in liability coverage, and will cover expenses in very particular situations, such as when your dog attacks a guest or a visitor is injured on your property. In some cases, this type of coverage protects against damage caused by children or pets even if they are not on your property.

Professional Accidents

Medical malpractice insurance is a type of liability insurance coverage that protects against mistakes made by physicians and other medical personnel. You can obtain professional liability insurance for just about any career under the sun, and the purpose is to cover any claims against you for negligence.

This type of coverage is intended for professionals in an advisory capacity, for the most part. If you are considered an expert in your field, for example, professional liability insurance might be necessary to protect you against claims made by clients for negligence.

Employee Accidents

Employers must carry worker's compensation insurance, which is yet another example of liability insurance. If an employee is injured on the job, worker's comp pays for medical bills, lost wages and other claims made by the injured employee. Employers can also carry general liability insurance to protect against claims made by customers, vendors and other parties injured on the site.

Negligence vs. Maliciousness

The purpose of liability insurance is to protect against claims due to the insured's negligence. It is not, however, intended to cover damage inflicted maliciously or purposefully by the insured.

For example, auto liability insurance will cover damage you cause in an accident with another party. It will not cover damage you inflict by intentionally ramming your car into someone else's during an episode of maniacal road rage.

This is often difficult to prove, but it is important to realize that insurance companies are careful. If they suspect that damage was caused intentionally by the insured, they will likely not cover the claim.

Sources:

Willful and Malicious Injury Exclusion
Homeowner Liability Insurance Coverage