The word ‘Liability’ for the purpose of insurance, relates to legal liability.

Liability insurance is a part of the general insurance system of risk financing to protect the purchaser from the risks of liabilities imposed by lawsuits and similar claims and protects the insured if the purchaser is sued for claims that come within the coverage of the insurance policy.

There are four major legal liability policies:
1. Piblic Liability; 2. Products Liability; 3. Professional Indemnity; and 4. Employer's Liability

The subject matter of these policies is potential legal liability towards third parties or employees, as the case may be. If legal liability is incurred, there will be financial losses in the form of damages or compensation. Liability insurance is designed to offer specific protection against third-party insurance claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract.

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