Why is Liability Insurance Required?
The Problem
In today's litigious environment, individuals and businesses confront the constant threat of legal actions and claims filed against them. Whether it's a slip-and-fall accident on business premises or a customer alleging property damage caused by a faulty product, the dread of financial liabilities is ever-present. Such liabilities can swiftly escalate into expensive legal battles without adequate protection, causing substantial financial strain and reputational harm to all parties involved.
The Solution
To reduce these risks and ensure financial stability, the adoption of liability insurance becomes imperative. This specialized insurance coverage acts as a safety net for individuals and businesses. It provides financial security against claims of bodily injury, property damage, and legal expenses, safeguarding their assets and reputation amidst adversity.
Note: Liability insurance is covered under general insurance policies. The scope of liability insurance in India is defined by the Public Liability Insurance Act 1991.
The true cost of liability : Real numbers, real consequences
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High Legal Costs
In 2019, Indian companies faced average lawsuit costs ranging from ₹10 lakhs to ₹50 lakhs.
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Consumer Trust
Edelman's 2020 survey revealed 60% of Indian consumers would stop buying from a company involved in a legal scandal.
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Rising Lawsuits
Litigation against executives in India surged by 15% in 2020 , according to PwC.
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IP(Intellectual Properties) Risks
In industries like tech and pharma, IP litigation costs averaged ₹20 lakhs to ₹1 crore in 2021, highlighting the need for IP liability insurance.
Don't let these risks catch you off guard. Protect your business with General Liability Insurance today!
Liability Insurance: Inclusions
The policy provides coverage for the following:
- Financial expenses incurred due to lawsuits filed against the insured
- Expenses incurred during investigations and settlements
- Financial coverage for the fees of investigating officer or hired lawyer after being sued by a third party
- Medical expenses incurred after an accident on the insured person’s premises that led to a third-party claim
- Medical expenses incurred after an accident from any of the insured person’s products or during official operations
- Any loss or damage caused to the third party's property while visiting the office of the insured person
Liability Insurance: Exclusions
The insurance policy does not provide coverage for the expenses arising out of the perils:
- Willful misconduct and intentional damagesÂ
- Loss or damage incurred as a result of natural disasters such as cyclones, volcanic eruptions, floods, storms, earthquakes, or windstorms
- Loss in the market and loss of goodwill
- Libel and slander
- Expenses coming out of wrongful eviction, defamation and false arrest
- Infringement of patents, copyrights, trademarks, trade names, etc.
- Fines and penalties
- Transportation of dangerous substances and materials unless opted for a separate kind of coverageÂ
- Loss or damage caused due to war, nuclear war
Types of Liability Insurance in India
There are different types of liability insurance policies that are available in India. Some of the most common liability insurance policies are:
Public liability insurance protects individuals and businesses from financial liabilities arising from bodily injury or property damage to third parties (excluding employees) caused by their operations or premises. It is essential for businesses that interact with the public, such as retail stores, restaurants, and service providers.
Professional indemnity insurance, also known as professional liability insurance, offers professionals safeguarding against allegations of errors, negligence or omissions in the services they deliver. Professional liability insurance is crucial for professionals such as doctors, lawyers, consultants, and architects who provide services to clients.
Directors and officers liability insurance safeguard corporate directors and officers from personal financial liabilities arising from claims of wrongful acts or decisions made in their official capacity. It is essential for companies of all sizes and their executives, including directors, officers, and board members.
- Unlawful acts
- Releasing confidential information
- Conflict of interest
- Failure to maintain the property
- Gross negligence
Errors and omissions (E&O) insurance covers professionals against claims of negligence, errors, or omissions in their services. It is necessary for professionals such as insurance agents, real estate agents, financial advisors, and IT consultants.
Employer Liability
Employer liability insurance, often associated with workers' compensation, protects employers from financial liabilities arising from work-related injuries or illnesses that employees suffer. It is mandatory for employers in India to purchase workmen compensation policy for their workers.
Third-Party Liability Insurance
Third-party liability insurance protects individuals and businesses from financial liabilities arising from claims made by third parties for bodily injury, property damage, or other losses caused by the insured's actions or negligence. It is crucial for individuals and businesses in various industries, including construction, transportation, and hospitality.
Cyber insurance protects businesses from the financial repercussions of cyber threats and data breaches. It covers a range of incidents, such as data breaches, hacking, ransomware attacks, and business interruptions caused by cyber incidents. With the increasing frequency of cyberattacks, cyber insurance is becoming an essential component of a comprehensive risk management strategy for businesses.
Who should Buy Liability Insurance?
The liability insurance coverage is designed for companies or individuals who are held legally liable for injuries or other issues mentioned above. This type of insurance policy is most suitable for doctors, hospitals, business owners, etc.
For instance, if a product manufacturing company sells an item that unintentionally causes loss or damage to a consumer, the consumer may file a lawsuit against the manufacturer.
However, if the manufacturing company has obtained a liability insurance policy, the insurer will cover the resulting loss or legal expenses, provided the damage was unintentional. This coverage offers financial security to businesses facing legal claims or lawsuits arising from unintended incidents, ensuring their assets are protected.
How is the Liability Insurance Premium Decided?
The insurance company considers different factors before deciding the premium amount for a liability insurance policy taken by an individual or a company. The first and foremost factor that affects a policy's premium is the amount of risk a company's product can cause. The higher the risk, the higher the premium amount will be.
Other factors that are considered by an insurance company include:
- The claim history of the insured
- The approach of the company toward the risk
- The business record of the company
How to Raise a Claim Under Liability Insurance?
Follow the steps mentioned below to raise a claim under liability insurance:
Step 1: Inform your relationship manager about the incident.Â
Step 2: Complete and submit the claim form shared by them.
Step 3: Your provided information will be sent to the insurance company for evaluation and claim registration, resulting in the generation of a claim reference number.
Step 4: The insurer will designate a surveyor upon initiating the claim.
Step 5: Following the survey, the assigned surveyor will specify the necessary documentation.
Step 6: Submit all required documents as instructed by the surveyor and await processing.
Step 7: Upon approval, the insurance company will release the claim funds.
Please note: The insurer will carefully review the terms and conditions of your policy to determine coverage for the claimed incident. Consequently, the decision to accept or reject the claim will be made at the insurer's discretion.
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