The concept of liability insurance has originated as a result of the fast and easy legal systems that are existent in the United States. The legal system basically enables all common men who are citizens (in some cases non-citizens) to initiate legal proceedings against any negative or evil action or incidence.
In honest words, such a legal system fulfills the true character and feature of democracy. Philosophies apart, such a legal system compels all people who are conducting business to have what is termed to be a general liability insurance coverage.
Insurance is safeguarding financial status by avoiding financial risk. Merchants in Europe, 'underwrote' the monetary risk and investment they were ready to insure or bear as a loss. Thus if the ship sunk or didn't make it to port the insuring merchants lost all money and if the ship reached the port, they would get back their investments with profit.
The modern concept of insurance has originated from this kind of transaction and has a simple yet comprehensive mechanism. It must be noted that all kinds of insurance policies, auto insurance, life insurance and health insurance have the same kind of working. The mechanism has been elaborated in the paragraphs ahead.
About Liability Insurance
The mechanism of liability insurance is congruent to other types of insurance coverage. People sue business organizations, establishments or businessmen. If the businessmen are indeed guilty of wrongful doing (intentional or unintentional), the courts order the establishment or business establishments to pay certain compensations to the one who sued them.
There are certain insurance policies which cover such liabilities. These plans or policies can be purchased by the business establishments. The policies require regular annual or monthly premium. In cases where unexpected liability originates in the process of working of the business. The insurance company covers such liability.
It must be noted that the liability insurance does not cover any sort of business liability such as payment to creditors, banks and lending institutes. Similarly, any payment regarding loan or debt are not covered. The liabilities that are the ones arising out of accidents and purely unexpected occurrences.
The insurance agreement states the exact items that will be covered by the policy. Often this insurance policy is known as 'comprehensive general liability insurance' or 'commercial general liability insurance'.
The liability insurance cost is often tailored according to the need to the need of the business. Pharmaceutical companies or share brokers often have mammoth premiums and coverage of such policies.
Landlord Liability Insurance: The Policy
Landlords and property owners often get their liability insurance because, reportedly tenants sue them. Landlords get the insurance to cover some tenant related expenditures. Some items covered in the policy, are:
- The insurance policy would cover all types of court proceedings initiated by the tenant, in cases where the landlord is not at fault.
- The lawyer fees and tenant compensation would be covered by the insurance company.
- In cases where the landlord does not have to pay compensation, the insurance company still covers many expenditures of the case.
- There are some landlord insurance coverage that include, the payment of fines, repair costs and losses that are caused unnecessarily by the tenants.
- In some cases, landlords sue tenants for some misdeed like excessive damage to the property or for repair costs. In such cases, the companies may cover the cost of running the case.
The coverage of these policies is decided before and in the agreement of insurance. The cost and premium varies from case to case and is often tailored to needs of the landlord.