The purpose of most short term insurance is to provide protection against a loss. Life insurance provides cover for parties that have a direct interest in you against death. Medical insurance provides finance to allow you to seek medical attention when needed for yourself. Liability insurance is quite different.
Liability insurance provides cover for a person, business or organisation against claims rendered by a third party. There are different types of liability insurance, the most common being public liability and personal liability. Most vehicle insurance includes a liability component when third party insurance is included as part of the cover.
Liability insurance generally protects the insured against claims by third parties. The major difference between short-term insurance and liability insurance is that short-term insurance provides cover for against loss incurred by the insured. Liability insurance covers the insured against claims by third parties. With liability insurance, it is the third party that has incurred the loss. When the third party decides to hold you or your business responsible for that loss, the liability insurance kicks in.
The first aspect of liability insurance is to protect the insured against being sued by a third party that holds the insured responsible for a loss. The first duty (and right) of the insurer is to provide defence for the insured against the claim by the third party. When liability has been admitted by the insurer of by a court, then the liability insurance provides cover against the claim.
Public liability is the most common form of liability insurance. It covers the insured against losses incurred by third parties as a result of the insured actions or from the use of goods or services supplied by the insured. An example would be when a retailer is sued for damaged caused by the sale of defective goods. The insurer will not only provide the insured with defence against the action, but will cover the cost of any liability.
Professional liability aims to cover professionals against law-suits brought by the public against a professional.
Other forms of liability include auto liability which will cover damage caused to other vehicles involved in a collision as well as medical costs and damage to other buildings or public facilities.
The purpose of life insurance is to protect family or business associates against the death of the insured person. By contrast, liability insurance could provide you with protection against inadvertently causing the death of someone else.
As a rule, insurance is in place to provide you with protection against the risk of loss of your own possessions, life and health. Liability insurance kicks in when you may be held liable for loss or injury to a third party.