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Chapter 6 Liability Insurance. What is Liability Insurance? There are many different types of insurance policies available, but liability insurance is.

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Presentation on theme: "Chapter 6 Liability Insurance. What is Liability Insurance? There are many different types of insurance policies available, but liability insurance is."— Presentation transcript:

1 Chapter 6 Liability Insurance

2 What is Liability Insurance? There are many different types of insurance policies available, but liability insurance is one of the most popular because it costs much less than many other options. liability

3 What is Liability Insurance? For example, In regard to auto insurance policies, liability insurance costs far less than full coverage. The reason for this is because full coverage insurance must pay for both your vehicle and any other vehicle involved in a collision, As well as property damage and medical expenses due to injuries to you or another damage

4 On the other hand, liability insurance is only responsible for the other party's losses. Your person and your property are unprotected, but liability insurance protects you from being held responsible for the other party's damages.

5 In legal terms The word liability refers to fault. The person who is at fault is liable to another because of his or her actions or failure to act. One example is in the case of a crime. The liability of the offending party may include providing restitution for damage to property or paying medical bills in the case of physical injury.

6 Automobile accident Another example of liability in the legal realm is an automobile accident. The person who caused the accident, through action or omission, is liable to the injured party. Liability insurance exists for just such a purpose. Liability insurance It covers the expenses of the injured party, including damage to the vehicle or other property as well as a certain amount of medical expenses, and may reimburse the injured party for attorney's fees if civil action is required.attorneycivil action

7 In accounting terms In accounting terms, liability describes an obligation. It refers to money owed to complete a transaction, debt that has yet to be paid, or products or services that have been paid for but have not yet been rendered. There are two general classifications to sum up these types of liability: long term and short term. ◦ Long-term liability describes debt paid out over more than one year, while ◦ Short-term liability refers to debt paid within a year or less.

8 Some other examples of liability Some other examples of liability include: Money that is yet to be paid out, such as benefits from a life insurance policy or a settlement, either one of which represents a liability for the insurance insurance An employee's pension, as well as any other savings or retirement fund, is also considered a liability for a company. For the consumer, liabilities may include a home mortgage, second mortgage, line of credit, lien of any kind or car payment. Of course, for the entity to which these monies are owed, each item generally represents an asset. mortgagesecond mortgagelien

9 Overall, liability simply describes some form of obligation or responsibility. It represents an outstanding debt, products or services that have yet to be provided, or acknowledgment of responsibility and payment provided for damage caused through actions or negligence. negligence

10 Types of liability insurance There are different types of liability insurance, including general liability, which works in much the same way as auto liability insurance, but covers businesses. General liability protects a company from third party claims. Aside from general liability, there is also D & O liability, employer liability, and professional liability insurance.

11 D & O liability D & O liability stands for "directors and officers" liability and is intended to cover the acts or omissions of those in the director or officer position. An entire company should not be held liable for the statements, actions, failure to act, or other mistakes that are the responsibility of an officer or director.

12 Employer liability Employer liability is also known as worker's comp, and it is a mandatory form of liability insurance coverage that all businesses must carry. While it sounds like it is intended to protect the employee, which it does to some degree, it is actually protection for the employer in case of injury, job related illness, or other damages for which the employee might sue the company.

13 Professional liability Professional liability is similar to malpractice insurance, although the coverage may not be as comprehensive as some malpractice policies in different fields.malpractice insurance The purpose for professional liability insurance is to protect those seen as professionals or "experts" in a given field, who may not be protected by general liability due to their expertise. When one is seen as a professional, he is held to a higher standard and is therefore often considered to hold greater liability towards his clients. Consequently, he needs more coverage than general liability insurance offers.

14 definition of liability The simplest definition of liability insurance is insurance which protects a person or entity from claims initiated by another party.

15 What Is Property Damage? property damage is generally recognized as injury to real or personal property. Damages in this category can be done to items such as cars, gardens, and homes. Injury can be caused intentionally, due to negligence, or by forces of nature, and still be considered property damage.

16 The causes of harm are not always clear. In some cases, the actual damages may be the result of a natural force, such as lightning.lightning It may have been a person’s negligence by leaving an item outdoors, however, that created the circumstances for the damages.

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