Liability vs Indemnity
Though, liability is a word that is used both in terms of individual as well as company level to describe what is owed to others, it is also used prominently in the insurance field. Here, it is used to describe the amount of money a person owes to another person or party for any damages caused to the party. Liability clause is thus used to calculate the obligation of the person who has taken insurance policy to compensate the injured or aggrieved person or party. There is another word indemnity that is frequently used in insurance policies and confuses many as it has many similarities with liability clause in an insurance policy. This article aims to clarify doubts between liability and indemnity by bringing out features of both.
We all know that insurance is a precautionary step to protect ourselves in case of a mishap or peril. We insure ourselves and our assets to safeguard against any future mishap, but in life insurance or when we are insuring our valuables like home and jewelry, liability and indemnity clauses are not in the picture as upon death of the insured individual no third party is liable for death and the insurance company just pays the sum assured in the eventuality of death to the family of the deceased. Liability is, however, invoked when death is accidental, and there is a guilty party who is responsible for the mishap or accident.
Liability is a feature of a policy where the owner of the policy gets coverage against claims that others might make because of injury or accident. For example, if someone trips and falls in front of your shop, which is an area included in your property, you may be held liable for the mishap and may be required to pay compensation to the injured. Liability coverage is one aspect of insurance that is included in many types of policies but in no other policy is it so predominant as in automobile insurance policies. If you have taken an auto insurance policy for your car, it is necessary to get included a liability clause that protects you in case of a mishap where others might get injured or property damaged because of your driving.
Indemnity is a clause that makes the injured party whole again should there be damage to him because of the acts of commission or omission on the part of the policy holder. Professionals like doctors often indemnify or protect themselves from claims should there be a complication arising because of their treatment in a patient. Withy such cases of claims against medical health care providers rising all the time, it has become common for doctors to get professional indemnity insurance to tackle such incidents easily.
What is the difference between Liability and Indemnity?
• Professionals such as doctors when they are at a fault to have caused injury to their clients, are often sued, and face claims from patients. Indemnity clause in their insurance policy protects them in the event of such claims by coughing up money to meet such claims.
• Liability insurance is not too different and is used to meet expenses arising out of responsibility of the policy holder in causing injury to others such as auto insurance policy where the driver may cause injury to others or damage other’s property.