Definition: In insurance, "liability" refers to the legal responsibility that an insurer has to pay damages or expenses if an event occurs causing a loss to the policyholder's property or person. The term "liability" is often used to describe the financial obligations of an individual or entity in relation to another party. Specifically: - In liability insurance policies, there are two types of losses: primary losses and secondary losses. Primary losses refer to costs that arise from a covered event, such as damage caused by fire or theft. Secondary losses, on the other hand, include costs related to additional expenses, such as legal fees for damages or medical bills. - The amount of liability an insurance policy covers is determined by its terms of coverage and the limits of the policy's deductibles. When an insurer pays a loss, it is typically limited to the amount specifically mentioned in the policy. - The process of calculating liability can vary depending on the specific policy and the rules of the insurance company. Generally, the total amount owed for a claim will be divided by the policy's deductible or premium amount to determine what percentage each party owes based on their share of the loss. - Liability policies are often structured in such a way that if there is an issue with coverage limits (which can occur due to unforeseen events), the insurer has the right to terminate the policy, and the remaining liability for the covered event will be automatically paid.

liability in insurance