Liability insurance: what is it and how does it work

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No one is immune from mistakes, and sometimes they cost us money. But liability insurance will help to avoid financial problems in case of force majeure. Let’s tell you how it works.

What is liability insurance?

With the help of liability insurance, you can compensate for the damage that you have caused to someone. Damage in this case is causing harm to health, life, movable or immovable property (that is, if you broke something, flooded it, spoiled it, someone suffered from your unintentional actions – the list of situations is not limited).

There are two main categories of liability insurance:

  • liability for harm – this type of insurance is needed for people who are afraid of causing the same damage from the definition above by their careless actions;
  • liability for improper performance of the contract – this type of insurance in the same cases is used in business.

Damage insurance will come in handy if, for example, you made repairs and flooded your neighbors from below. Damage varies. For example, in the case of flooding, there may be not only direct victims – neighbors, but also indirect ones. If you also flooded the premises of the amateur theater on the floor below, the audience will be upset by the cancellation of the performance. However, they will not be able to demand money from you for moral damage – at least in our country things are like this, and in some other countries you would have to compensate for the damage and indirect victims.

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Is liability insurance required?

Liability insurance is voluntary and mandatory. For example, if you own a car, it is illegal to drive without insurance.

Voluntary insurance includes all other cases: you accidentally flooded someone or started a fire, your lap dog attacked a person. You yourself evaluate whether you or your loved ones are at risk of doing something for which you will have to pay a lot of money from the family budget.

It is almost impossible to find a separate liability insurance for the whole family among the offers of insurance companies, because such a service is not in great 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 property insurance policy: you insure your apartment and at the same time your civil liability to your neighbors in case someone from your family floods them or starts a fire.

Similarly, you can insure a purebred pet: some companies, together with animal life insurance, offer to insure your liability as the owner of this animal in case the animal harms someone. Whether it is possible to insure only the liability of the owner, without life insurance of the animal itself, check with the insurance company – it all depends on its rules.

So, liability insurance will come in handy if:

  • you are afraid of accidentally flooding or setting fire to your neighbors;
  • you have pets that could potentially attack another person;
  • you have a private jet, a small boat, or you are a hunter and you have a gun. Accidents involving this property are also insured with a liability insurance policy.

How to conclude a liability insurance contract?

1. Choose an insurance company

First you need to choose an insurance company that has a license from the Bank for liability insurance. You can check this on the website of the Bank of Russia . When choosing an insurance company, compare the rates of different companies.

2. Collect documents

The second stage is the collection of the necessary documents. The list of documents will depend on the specific type of insurance and the requirements of the insurance company. For example, for an OSAGO policy, you will need a passport, a technical passport of the car, a MOT coupon (valid) 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 is valid. You can choose the amount of compensation for voluntary insurance yourself, but the larger this amount, the greater the premiums that you will have to pay.

4. Find out when you will receive a payout

Find out and clarify what is considered an insured event 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. Do not forget to look at the general liability insurance rules that the company operates under in order to understand exactly what you are buying.

5. Pay attention to the number of cases and risks

The company can set not only the maximum payout amount, but also a limit on insured events or types of risks. Check how many times you can flood the neighbors – perhaps the fifth or tenth case your insurance will no longer cover.

6. Find out in which case insurance will not work

There are exceptions to the insured event. You will not be paid out by insurance if the insurance company or victims prove that you acted intentionally or under the influence of drugs.

7. Check additional terms

Additional insurance clauses can be added to the insurance contract. For example, to prescribe in the contract a condition that the insurance will cover the services of a lawyer in the event of a court case or an examination if the court needs it.

If you understand all the terms of the contract and they suit you, it remains to sign it and make the first insurance premium – usually from this moment the insurance begins to operate if there are no other conditions in the contract.

What else do you need to know about liability insurance?

Scope of insurance

Under a liability insurance contract, you will not be able to insure illegal interests, that is, interests that are contrary to the law and can harm other people.

A responsibility

Insurance does not relieve you of full responsibility for the damage caused. Yes, the victim will receive material compensation, but you may also incur criminal or administrative liability. In addition, the insurance company compensates for damage only within the limits of the sum insured – if the harm that you caused is estimated at a large amount, you will have to pay extra.

legal capacity

If a person is declared incompetent and he has a trustee, then all rights and obligations under insurance (for example, property or life) are transferred to him. But in the case of liability insurance, the incapacity of the insured means that the contract automatically terminates.

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