Of all the types of insurance available, one of the most important, and often least understood, is liability insurance.
This type of coverage is essential for both individuals and businesses, offering vital financial protection. But what does liability insurance actually entail? We explain its key aspects and why it is so important.
What is liability insurance?
Liability insurance is a protection that supports the insured in the event of causing damage to third parties, whether to their person, property or assets. This type of insurance covers both legal costs and compensation that the insured must assume, as long as the incident causing the damage is specified in the terms of the policy.
This liability is established in article 1,902 of the Civil Code, which states: "By action or omission, the insured causes damage to another, acting with guilt or negligence, he is obliged to repair the damage caused."
Furthermore, in article 1,903, the regulations expand this obligation, indicating that the liability of the previous article "applies not only to one's own acts or omissions, but also to those of persons for whom one must be held responsible." An example is the liability of parents for damages that their children may cause while they are in their care.
What does liability insurance cover?
Civil liability insurance offers coverage for the following risks:
- Personal injury: Protects business owners and self-employed persons against possible physical or psychological damage that may be suffered by people within their premises, whether they are clients, employees or visitors.
- Property damage: Provides support against damage or destruction of the company's or the self-employed's own assets, such as real estate, machinery or equipment.
- Material damage: Protects against possible damage to third-party assets, such as property or vehicles, that could be damaged by business activity.
- Damage to reputation: It can also cover the negative impact on the image or credibility of a company or self-employed person, providing protection against damage to reputation.
How does civil liability insurance work?
Civil liability insurance applies when the insured causes damage to third parties in their property, personal integrity or assets, and is obliged to repair the damage caused.
This insurance is effective when the insured's liability is determined in an incident that gives rise to claims for compensation by third parties. For example, in a traffic accident where the insured is responsible for damage caused to another vehicle or to a person's health, the liability insurance will cover the costs corresponding to said compensation.
Home liability insurance
This is a coverage that protects owners against possible damage or harm caused to third parties within their home.
This insurance covers a wide variety of common risks in daily life at home:
- Damage caused by pets: If a pet of the owner damages property or causes injury to third parties, the insurance covers the expenses related to these incidents.
- Injuries to visitors: If a guest or visitor suffers an injury on the property, the insurance covers medical expenses and any necessary compensation.
- Water damage: Coverage extends to damage caused by water leaks or breaks in the pipes of the home.
- Damage to property of others: Includes the repair or replacement of third party property, such as furniture, appliances or vehicles, in the event of an accident within the home.
In addition to these basic coverages, some policies include legal assistance and support in emergency situations.
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