What is the Difference Between Liability Insurance and Other Types of Insurance?
Liability insurance differs from other types of insurance because it compensates someone other than the person who takes out the policy. In one way, it covers the owner of the policy from losing his or her own money. So for example, if a person has a car accident, the insurance allows the driver to protect his assets, in most cases, and the other injured parties would first have access to the amount of liability for which the driver is insured. Some common examples include liability insurance for drivers or businesses, and malpractice insurance.
Other types of car insurance, like collision and comprehensive, allow the insured person to submit a claim to cover the damages to his car. If the driver is hurt in a car accident, collision insurance must pay for health care in most cases, even if the person caused the accident. Further, if his car is damaged in some way other than in a collision, comprehensive insurance will pay for repairs.
In the US, many states require drivers to carry a set amount of liability insurance to cover damage they might inflict on another person, his car, and his property. Generally, people who are making payments on a vehicle must also cover collision and comprehensive insurance so that the bank that owns the loan is protected if the borrower totals his or her car. Many people who own their cars outright also carry liability, collision, and comprehensive insurance to protect themselves from losses in accidents.
Liability insurance is purchased in set amounts, and costs more for more coverage. It will not always protect the policyholder completely from possible lawsuits. Some types, like that which might be purchased by heads of corporations, can protect the holder's personal finances from being part of a lawsuit. When a driver, a member of a corporation, or a medical professional acts illegally, however, liability may not cover all damages. So for example, the doctor who causes injury to a patient because he was working while intoxicated is likely to be sued for much more than his or her covered malpractice insurance.
Another type of insurance carried by people who have a great deal of assets is personal umbrella insurance. This is often purchased in large amounts, like millions of dollars of liability, and it tends to match the policyholder's assets closely. Once again, this type of insurance will pay for harm done to other people and protect the insured person's assets. It will not pay for harm to the policyholder himself.
In all cases, liability insurance serves two purposes. It protects the holder's bank account and covers the injuries of others. A history of past accidents, malpractice, or poor business practices can greatly increase the cost of this type of insurance.
I have a doctor friend who has a part-time practice in her home. If she doesn't keep a certain number of patients, she can't afford to pay her liability malpractice insurance.
For someone in this kind of position, paying for this extra insurance is a huge amount of money, but there is no way she could practice without it.
My parents have liability insurance in the form of an umbrella policy. This is in addition to their regular insurance, but offers more protection for them if someone were to sue them.
They have a lot of assets, and for them it makes sense to have this extra protection. I don't imagine I will ever have need for something like this, but can see how it gives wealthier people another layer of protection.
The way many people are so quick to sue someone these days, it would make sense to have has much coverage as you needed to cover all your assets.
We always try to keep an older car around for a spare. You never know when you might need it or someone else needs to borrow it for some reason.
With this older car we just keep liability insurance on it. If something were to happen to the vehicle, it really wouldn't be worth replacing. We figure it is worth taking our chances instead of paying for full coverage on this vehicle all year long.
For several years my son carried liability insurance only for his auto insurance. He was not required to have comprehensive insurance and it wouldn't have mattered much because he was driving a pretty old car.
He had several speeding tickets as a teenager, and therefore could only afford a liability insurance policy. In our state, you can't drive unless you carry liability insurance, and even paying for this alone was not cheap because of his driving record.
He had to save up a few thousand dollars so he could buy a car outright and then pay the liability insurance. He got pretty tired of this, and eventually was able to afford full coverage and start driving a nicer car.
General liability insurance is important because it protects a business from a lawsuit that was due as a result of an injury that occurred on the premises or some form of property damage to a customer.
Small business liability insurance is important because a judgment against the small business can cause a small business owner to have to file for bankruptcy.
Many businesses have umbrella liability insurance. This is also known as excess liability insurance because it is an additional layer of protection for the business.
When the commercial general liability insurance claim is exhausted, the umbrella policy picks up the remaining balance of the judgment against the company.
Individuals that may have a high net worth that they want to protect can also hold an umbrella liability insurance policy.
You can get a liability insurance quote from State Farm. They will offer you a comprehensive plan and they are really excellent to deal with.
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