LIABILITY INSURANCE
Liability insurance definition
Liability insurance is cover that protects an insured against legal responsibility for injury, damage or financial loss caused to third parties.
In practice, this means liability insurance (referred to as casualty insurance in the US) offers protection against the legal obligation to pay compensation and costs for causing bodily injury, property loss or damage to third parties. This gives insurers, brokers, reinsurers and risk managers a shared way to discuss the concept when reviewing policies, claims, regulation or market data.
This term is especially useful in insurance market analysis, policy wording and risk transfer decisions. It helps users interpret insurance terminology consistently across markets, policies and risk data. It also helps users compare how insurance is structured, regulated, priced or claimed across different markets.
Liability insurance is closely related to casualty insurance, employers’ liability, product liability and professional liability. Linking these concepts together helps build a clearer glossary structure and gives readers a stronger understanding of how individual insurance terms connect within wider international insurance practice.
At a glance
- Used in
- Insurance market analysis, policy wording and risk transfer decisions.
- Purpose
- Helps users interpret insurance terminology consistently across markets, policies and risk data.
- Important because
- Clear definitions support better comparison of insurance products, market practices and regulatory requirements across jurisdictions.
- Related terms
- casualty insurance, employers’ liability, product liability and professional liability.
Example of liability insurance
A visitor is injured at a company site and claims compensation. Liability insurance may cover the insured’s legal liability and defence costs, subject to the policy terms.