A general term for the type of "risk financing," which can protect your business when someone files a lawsuit against it.
In the event that someone files a claim alleging you are responsible for their financial loss, Liability Insurance can cover the cost of the lawsuit. In exchange for a premium, an insurance provider offers you financial and legal protection in the event that a liability claim arises – just so long as the liability in question is covered under your policy and the claim does not exceed that policy's limits.
What sets Liability Insurance apart from other types of insurance is that it deals specifically with third-party claims, and the payments are usually paid by the insurance company to those third parties directly – not to you.
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