What is the Difference Between Liability Insurance and Other Types of Insurance?

image Liability insurance differs from other types of insurance because it protects people other than one’s self from actions one might take that cause harm to others. Some examples of common liability insurance include liability insurance for drivers, malpractice insurance, or business liability insurance.

In one way, liability insurance covers the owner of the policy from losing his or her own money. So for example, if a person has a car accident, liability insurance allows one to protect one’s assets, in most cases. Instead, the injured other parties would first have access to the amount of liability for which one is insured.

Other types of car insurance, like collision and comprehensive, allow the insured to submit a claim to cover one’s own damages. If one is hurt in a car accident, collision insurance must pay for health care in most cases, even if the person caused the car accident. Further if one’s car is damaged in an accident, comprehensive insurance will pay for repairs, even if the accident is the fault of the covered person.

For auto insurance, many states require one carry a set amount of liability insurance to cover damage one might inflict on another person’s car, property or self. Generally, those who are making payments on a vehicle must also cover collision and comprehensive insurance so that the bank to which one owes money is protected if one totals his or her car. Many people who own their cars outright also carry liability insurance, and collision and comprehensive to protect themselves from losses in accidents they might cause.

Liability insurance is purchased in set amounts, and costs more for more coverage. It will not always protect one completely from possible lawsuits. Other types of liability insurance, like that which might be purchased by heads of corporations can protect one’s personal finances from being part of a lawsuit. However, when a driver, a member of a corporation, or a doctor acts illegally, 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 liability insurance carried by people who have a great deal of assets is personal umbrella insurance. This is often purchased in huge amounts, like millions of dollars of liability. It tends to match one’s assets pretty closely. Once again, this type of insurance will pay for harm to other people, and will protect one’s assets. It will not pay for harm to one’s self.

In all cases, liability insurance serves two purposes. It protects one’s bank account and covers the injuries of others. Past accidents, history of malpractice or of poor business practices can greatly increase the cost of liability insurance.

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