Liability insurance

For the self-employed, be it businessmen or professionals, the lurking danger to income and wealth is from damage claims by third party such as clients and consumers, as well as an assortment of risks at the workplace.

Damages awarded against you through legal suits by aggrieved individuals or business entities after a mishap disrupt the carefully managed business finances.

This is where liability insurance comes into play:

How liability policies help?

Liability policies reimburse you for all the damages that might be awarded against you by a court and also the associated costs. The policies are broadly classified under two heads:

• Public liability cover: This policy covers all the third party risks arising at your workplace or business establishment. Besides assisting you pay the damages, the cover will also help you foot the legal costs.

One can buy a cover of up to Rs. 25,000 along with the householder’s policy or take a stand alone policy for a premium of Rs. 50 for a lakh.

• Professional liability cover: The policy provides protection to individuals and their employees in case mishaps at workplace causes damage to others. It is a crucial cover for self employed professionals such as lawyers, engineers, doctors, consultants, etc.

It is usually helpful for businessmen who own public establishments such as restaurants or shops.

The premium depends upon the natures of individuals work. The magnitude of the cover depends on what profession one is in, the scale of operations and earnings.

All public sector general insurers offer professional liability covers under Professional Indemnity Policy, while most private insurers offer comprehensive policies that cover professional indemnity along with other liability risks.

Key pints to remember:

While taking a liability policy, one should bear in mind that it covers negligence but not “willful negligence”. Ones claim will be denied if there is a proof of the latter.

The need of the cover is the highest when one ventures into complex or specialized fields.

If used carefully, one can bring down premium costs. Depending on the vocation, specific exclusions exist.

Also, take note that since the cover is for people named in the policy, ensure that people at risk are included.