Types of Liability Insurance
Four core legal liability covers, a few newer ones, and the trigger that decides which year pays.
A liability policy pays what the insured is legally liable to pay someone else: a visitor who slips in a Bengaluru mall, a family harmed by a defective pressure cooker, a client who loses money because a chartered accountant made an error. Unlike fire or motor own damage, the insured's own property is never the subject. The policy protects the insured's balance sheet against claims from third parties, and it usually pays the defence costs too.
The courseware groups the main legal liability covers into four: public liability, products liability, professional indemnity and employer's liability. Directors and officers (D&O) and cyber covers are newer additions that IC-11 touches in passing.
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The Main Liability Policies at a Glance
Public liability (industrial or non-industrial)
Covers liability for
Death, injury or property damage to third parties arising out of the insured's premises or business
Typical buyer
Factories, hotels, malls, cinemas, hospitals, offices
Products liability
Covers liability for
Injury or damage caused by a defect in a product after it leaves the insured's premises
Typical buyer
Manufacturers, importers, distributors, exporters
Commercial general liability (CGL)
Covers liability for
Public and products liability in one policy, plus advertising and personal injury
Typical buyer
Larger companies, often with foreign parents
Professional indemnity
Covers liability for
Financial loss to clients from negligence, error or omission in professional services
Typical buyer
Doctors, hospitals, chartered accountants, architects, engineers, lawyers
Directors and officers (D&O)
Covers liability for
Claims against directors and officers for wrongful acts in running the company
Typical buyer
Listed and unlisted companies, for their board and managers
Employer's liability / employee's compensation
Covers liability for
Injury to the insured's own employees arising out of and in the course of employment
Typical buyer
Every employer of workers
Cyber liability
Covers liability for
Liability and costs from data breach, hacking and network failure
Typical buyer
Companies holding customer data; individual cyber policies for retail buyers
| Policy | Covers liability for | Typical buyer |
|---|---|---|
| Public liability (industrial or non-industrial) | Death, injury or property damage to third parties arising out of the insured's premises or business | Factories, hotels, malls, cinemas, hospitals, offices |
| Products liability | Injury or damage caused by a defect in a product after it leaves the insured's premises | Manufacturers, importers, distributors, exporters |
| Commercial general liability (CGL) | Public and products liability in one policy, plus advertising and personal injury | Larger companies, often with foreign parents |
| Professional indemnity | Financial loss to clients from negligence, error or omission in professional services | Doctors, hospitals, chartered accountants, architects, engineers, lawyers |
| Directors and officers (D&O) | Claims against directors and officers for wrongful acts in running the company | Listed and unlisted companies, for their board and managers |
| Employer's liability / employee's compensation | Injury to the insured's own employees arising out of and in the course of employment | Every employer of workers |
| Cyber liability | Liability and costs from data breach, hacking and network failure | Companies holding customer data; individual cyber policies for retail buyers |
Common Exclusions Across Liability Policies
Read any public sector wording and the same list repeats, because each item belongs to another policy or is uninsurable.
- check_circleContractual liability the insured would not have had without the contract.
- check_circleFines, penalties, punitive or exemplary damages.
- check_circleDamage to property owned by the insured or in its care, custody or control (that is a property policy's job).
- check_circleInjury to the insured's own employees (employer's liability or employee's compensation covers that).
- check_circleMotor vehicle use (third-party liability belongs under the Motor Vehicles Act policy).
- check_circlePure financial loss such as loss of goodwill or market, except in professional indemnity and D&O, whose whole purpose is financial loss.
- check_circleLiability under the Public Liability Insurance Act or any no-fault law, which needs the separate Act policy.
Occurrence vs Claims-Made: The Trigger
Liability claims arrive late, sometimes years after the event. The trigger decides which year's policy pays.
- Occurrence basis
- The policy in force when the injury or damage happened pays, even if the claim is made later.
- Claims-made basis
- The policy in force when the claim is first made against the insured pays. D&O and most professional indemnity policies work this way.
- Retroactive date
- On claims-made and many products and public liability wordings, events or products that left the premises before this date are excluded. Renewing with the same retroactive date keeps the earlier years protected.
- Discovery (extended reporting) period
- A period after expiry during which claims arising from earlier wrongful acts can still be reported, where the policy is not renewed.
- AOA and AOY limits
- Any one accident and any one year: the per-claim limit and the annual aggregate. The ratio between them drives the premium.
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Products Liability Is Not a Product Guarantee
A Ludhiana appliance maker's mixer-grinder overheats and burns a customer's kitchen. Products liability pays the customer's injury and kitchen damage. It does not pay to recall the batch, to repair or replace the faulty mixer itself, or for the product simply failing to do its job. Those are business risks (product recall is a separate, specialist cover), not liability to a third party.
How IC-11 Tests This
Expect "which are the four major legal liability policies" (public, products, professional indemnity, employer's liability) and "which is excluded under products liability" (recall costs, repair or replacement of the product). The trap is picking an option that slips a property or motor own damage cover into the liability list, or treating professional indemnity as cover for bodily injury on the premises.
FAQs
What are the types of liability insurance?expand_more
Public liability, products liability, professional indemnity and employer's liability are the four main legal liability covers. Commercial general liability combines public and products liability, and D&O and cyber covers are written for specific exposures.
What is the difference between public liability and products liability?expand_more
Public liability covers injury or damage arising from the insured's premises and operations. Products liability covers injury or damage caused by a defect in a product after it has left the insured's premises.
What is a claims-made liability policy?expand_more
A policy that responds to claims first made against the insured during the policy period (or any discovery period), usually subject to a retroactive date. D&O and professional indemnity policies are commonly written this way.
Does liability insurance cover injury to my own employees?expand_more
No. Public and products liability policies exclude injury to employees arising out of employment. That is covered by an employee's compensation (employer's liability) policy.
Next steps
- PLI Act 1991arrow_forward
- Employee's Compensationarrow_forward
- Miscellaneous Policiesarrow_forward
- IC-01: Principle of indemnityarrow_forward
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