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Liability Insurance

Last updated 29th Nov 2022


The term liability insurance is used to describe the portion of an insurance policy that protects the policyholder from lawsuits and similar monetary claims. Liability insurance typically protects against claims of negligence, malpractice, and other actions that result in injury or loss of property.


Liability insurance covers not only the policyholder, but may also provide protection for family members and relatives living with the policyholder. For example, any person driving the policyholder's car with their permission is protected by the liability insurance portion of an automobile policy.

Liability insurance typically pays for legal defense costs, bail bond, and emergency services to others. It pays legal claims for property damage, injuries to others, emergency medical care, and even loss of income. The primary benefit liability insurance provides is financial security to the policyholder in the event of a costly accident, or lawsuits that result from an accident.

Liability insurance can be purchased by corporations or individuals as part of an umbrella policy, or through automobile and homeowners insurance. Intentional or willful damage to property is not covered by liability insurance.

Related Terms

comprehensive insurance, collision insurance, gap insurance

Moneyzine Editor

Moneyzine Editor