It is a part of the general insurance system of risk financing to protect the purchaser (the "insured") from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy.

Policy covers civil liabilities to third parties, arising from bodily injury, property damage, or their wrongs due to the action or inaction of the insured. It covers only civil liabilities and not criminal liabilities.

Types of such policies

  •  Personal liability
  • Business liability
  • Property damage liability
  • Motor car liability