No one is safe from mistakes, and sometimes they cost us money. But liability insurance will help to avoid financial problems in case of force majeure. We tell you how it works.
What is liability insurance?
With liability insurance, you can compensate for the damage you have done to someone. Damage is harmful to health, life, movable or real estate (that is, if you broke something, flooded, spoiled, someone suffered from your unintentional actions – the list of situations is not limited).
There are two main categories of liability insurance:
- responsibility for harm – this type of insurance is needed by people who are afraid of their careless actions to inflict the same damage from the definition above;
- responsibility for improper performance of the contract – this type of insurance in the same cases is used in business.
Injury insurance will be useful if you, for example, did repairs and flooded neighbors from below. The damage can be different. For example, in the case of flooding, there may be not only direct victims – neighbors, but also indirect. If you flooded the amateur theater floor’s premises below – the audience would be disappointed with the performance’s cancellation. However, they will not demand money from you for moral damage – at least in our country, things are so. In some other countries, you would have to compensate the victims and indirectly.
Is it necessary to insure responsibility?
Liability insurance is voluntary and compulsory. For example, if you have a car, it is illegal to drive without insurance.
Voluntary insurance includes all other cases: you accidentally flooded someone or set a fire, your bologna attacked a person. You assess whether you or your loved ones are at risk of doing something for which you will have to give a lot of money from the family budget.
It is almost impossible to find separate liability insurance for the whole family among insurance companies’ offers because such a service is not in high demand in our country. But you can insure your liability in a package offer with another type of insurance.
For example, companies offer a combined policy for property insurance: you insure an apartment and your civic responsibility to your neighbors if someone from your family floods them or sets a fire.
Similarly, you can insure a thoroughbred pet: some companies, together with animal life insurance, offer to insure your responsibility as the owner of this animal if the animal harms someone. Whether it is possible to insure only the owner’s responsibility, without life insurance of the animal, check with the insurance company – it all depends on its rules.
So, liability insurance will come in handy if:
- You are afraid to flood or set fire to neighbors accidentally;
- You have pets that could potentially attack another person;
- You have a private jet, a small ship, or you are a hunter, and you have a gun. Accidents involving this property are also insured with the help of a liability insurance policy.
How to conclude a liability insurance contract?
1. Choose an insurance company
To first choose an insurance company that has a Bank of United States liability insurance license. You can check this on the U.S. Bank website. When choosing insurance, compare the rates of different companies.
2. Collect documents
The second stage – collecting the necessary documents. The list of documents will depend on the specific type of insurance and requirements of the insurance company. For example, you will need a passport, a technical car passport, a TO (acting) ticket, and a driver’s license.
3. Find out the cost of insurance
The cost of insurance is usually calculated individually. It depends on how much you will reimburse and how long the contract expires. You can choose the amount of reimbursement for voluntary insurance, but the more for this amount, the more contributions you will have to pay.
4. Find out when you will receive a Payment
Find out and specify what is considered an insurance case under the contract, the entire amount or only part of it will be reimbursed to you in each case, whether the contract includes any additional paid services. Don’t forget to see the general liability insurance rules that the company operates to understand exactly what you are buying.
5. Please note the number of cases and risks
The Company can set the maximum amount of payment and limit insurance cases or types of risks. Check how many times you can flood your neighbors – may be the fifth or tenth case your insurance will not cover.
6. Find out in which case the insurance will not work
Out of the insurance case, there are exceptions. You will not be paid insurance if the insurance company or victims prove that you acted intentionally or under the influence of drugs.
7. Check additional conditions
In the insurance contract, you can add additional insurance items. For example, to prescribe in the contract a condition that the insurance will cover the services of a lawyer in the case of a trial or examination if the court needs it.
If all the terms of the contract are clear to you and suit you, it remains to sign it and make the first insurance premium – usually from that moment the insurance begins to operate, if the contract does not have other conditions.
What else do you need to know about liability insurance?
Scope of insurance
Under the liability insurance contract, you will not be able to insure illegal interests. That is interests against the law and can harm other people.
Insurance does not absolve you of full responsibility for the damage caused. Yes, the victim will receive financial compensation, but you can also incur criminal or administrative responsibility. Also, the insurance company reimburses the damage only within the insurance amount – if the damage you caused will be assessed in a large amount, you will have to pay extra.
If a person is declared incapacitated and has a guardian, then all the rights and obligations of insurance (e.g., property or life) pass to him. But in the case of liability insurance, the insurer’s incapacity means that the contract automatically terminates the action.