What Is Liability Insurance and What Does It Cover?
Liability insurance will cover you so you will not have to pay costs associated with damages caused to another person’s property. There are two main kinds of liability insurance: personal liability insurance and auto liability insurance. Personal liability insurance covers costs arising from accidents that occur in daily life, such as accidently dropping your friend’s smartphone and it breaks. In this case, the costs would be covered by a personal liability insurance policy. This kind of policy covers the following costs:
- Personal injury: in the case of bodily and psychological harm to others
- Property damage: in the case of the defect or loss of value of property
- Financial losses: to cover income losses
Auto liability insurance covers damages caused to motor vehicles. In Germany, auto liability insurance is compulsory. This kind of insurance is mandatory for people who own and drive a motor vehicle. Auto liability insurance covers:
- Repair costs, replacement costs, towing costs, etc.
- Property damage to buildings, street signs, etc.
- Compensation for personal suffering, treatment costs, loss of wages for the plaintiff of damages
Note: Liability insurance only covers damages caused to the property of others. Damages caused by yourself to your own property will not be covered.