Liability insurance is that insurance that provides compensation for a third party. Liability insurance protects the owner from losing his or her own money. The insurance acts in a way as if it does not protect your own person or property. It protects you from being held responsible for the damage of other parties. It is a compulsory form of insurance that has to be taken by those who are at risk of being sued for negligence by third parties. It is in practice in many countries.
Liability insurance policies include both legal costs and payouts for which the insured could be responsible if found legally liable. These policies do not cover intentional damage and contractual liabilities. Liability insurance protects a product manufacturer if he purchases a product liability insurance. This insurance covers them if a product becomes faulty and causes damage to a purchaser or a third party. Certain business owners purchase the liability insurance that protects them if an employee is injured during business operations. Liability insurance is of different types that include public liability insurance, employers liability insurance, product liability insurance, and general liability insurance.