When it comes to the question of what liability insurance is, many would recommend it as a crucial insurance policy. In fact, if you work in a profession prone to lawsuits, some states require you to maintain certain types of liability insurance.

What Are Liabilities?

Generally speaking, liabilities are legally binding obligations payable to other entities (i.e., third parties). Professionals who have a higher likelihood of facing liability lawsuits include:

Lawyers
Engineers
Doctors
Accountants
Entrepreneurs
Drivers

The concept of liability comes from the idea that you have responsibilities to others, whether you are a homeowner or a working professional. For instance, doctors have an obligation to care for a patient by meeting a certain standard of care, and not act negligently or carelessly. If a doctor acts negligently and a patient is hospitalized longer, for example, the doctor may be liable for the medical costs from the extended hospitalization.

What Are Liability Coverage Examples?

Once you can answer "What are liabilities?" you can better understand the types of injuries liability insurance will typically cover. Liability insurance coverage can be for bodily injury and property damage. For an example of the former, say that you have a guest in your home and while walking up to your door, he or she slips on ice and breaks an arm.

Property damage, on the other hand, refers to a loss to third-party property. For example, imagine your children visit a neighbor's property to play baseball but accidentally throw the ball through your neighbor's window.