What should you know about Liability Insurance?

Liability.

Under Hong Kong law, this is “the state of being responsible for something.” A mortgage, for example, is a “liability” as the mortgagee is responsible for paying a fee to the mortgager. But Liability is encountered in many other instances in every day life, and when accidents occur you could be liable for their outcomes if you do not hold proper protection.

Liability is, arguably, one of the only concerns of insurance; this because the definition of insurance is “the equitable exchange of risk for a pre-determined fee.”

Through insurance, an individual or business pays an insurer to assume liability for a risk being covered by an insurance policy. Instead of the policyholder being responsible for financially remedying any accident or injury they caused, the insurance will assume that burden subject to the policy terms and conditions.

So what is “liability” insurance? What does it cover? And how may it impact your life?

Common Liability Insurance in Hong Kong

The most common form of liability insurance protection in Hong Kong is in relation to Car Insurance coverage. Under Hong Kong law, all drivers operating vehicles on public roads must hold, at minimum, Third Party Car Insurance coverage.

This type of minimum insurance protection covers up to:

• HK$ 100,000,000 for any Death or Third-Party Injury
• HK$ 2,000,000 for any Damage to Third-Party Property

It is important to understand that, under a Third Party Car Insurance policy, you are not covered for your own damages. This type of insurance provides financial compensation, in lieu of your liability, to other people who are damaged due to a traffic accident for which you are responsible.

When another driver hits your vehicle, you are paid for the damages that you receive through their Third-Party Insurance coverage. Your insurance, if you hold a Third-Party Protection policy, will not provide any compensation.

Your liability towards financially compensating any third party for a death, personal injury, or property damage you may have caused will normally be satisfied by your insurance policy. This does not, however, ensure that you avoid criminal liability for your actions.

Public and General Liability Insurance

Outside of Car Insurance, Public and General Liability Insurance is often found at any business – particularly those which interact with members of the general public on a regular basis. Taking out a General Public Liability insurance policy is normally completely at your discretion, but can protect an individual or business from a significant financial loss in a worst case scenario.

From coffee shops to construction firms, most businesses you interact with every day have comprehensive public liability protection. As do any concerts or events you go to. This is simply because liability claims can be extremely expensive. Public Liability Insurance solutions are generally built around the risk that they are covering. A Shop Contents Insurance package, for example, will normally have a decent amount of public liability protection while a construction firm would have a much bigger policy, with higher limits, reflecting their increased risk of a claim.

This type of insurance protects you against accidental death, injury, or property damage stemming from activities which you control.

From the risk of a hammer being dropped 40 floors down a building during an apartment renovation, through to the risk of a customer tripping over your entrance and breaking their arm, there is a lot that can go wrong in every day life. Public Liability Insurance ensures that whatever your risk may be, you are not left personally financially responsible.

Product Liability Insurance

Product Liability, also known as Commercial Goods Liability insurance (or CGL Protection), is increasingly necessary in a world driven by E-commerce and major sales platforms like Amazon.com, Etsy.com, and Ebay.com.

Many major websites require vendors selling on their platform to obtain CGL Insurance. This is due to the simple fact that in a modern, mass-produced economy sometimes products will have defects, and consumers have rights. To this end, if your product causes injury, death, or property damage, then Commercial Goods Liability Insurance will ensure that you are not financially responsible.

There are many different types of Product Liability Insurance coverage available – both in Hong Kong and around the world. But many products are now designed to satisfy the requirements for vendors on a site like Amazon.com, while offering the ability to be fully customized as a business grows. Coverage under a Commercial Goods Liability insurance policy can be obtained for:

• US$ 1,000,000 in protection per occurrence, in the aggregate
• Bodily Injury, Accidental Death, Property Damage, Contractual Damage
• Choice of Commercial, Umbrella, and Excess Liability Protection

This gives companies in the business of physically manufacturing and selling goods the assurance that even with a defect, their future is not at risk to due financial liability for the fault.

But what about companies that don’t sell or make physical products?

Professional Liability Insurance

Companies that do not make or sell any physical goods can rely on Professional Liability Insurance to protect their businesses. Professional Liability, also known as Professional Indemnity or “errors and omissions” insurance, protects businesses from the liability risks associated with workers making mistakes.

This means that law firms incorrectly advising clients (who then suffer a loss), would be covered from their financial liability through a Professional Indemnity Policy. Similarly, an insurance broker which overlooks a policy renewal and does not set up a customer’s coverage for the coming year, would also be protected from the financial repercussions of their mistake through a professional liability insurance policy.

This is important, because businesses that don’t make any physical goods are normally ones which provide services. And in Hong Kong the major service industry is Finance. A loss to a customer using a financial services company can have severe and long-term consequences, not to mention being extremely expensive. Because of this, Professional Indemnity Insurance is critical in Hong Kong.

In fact, Professional Liability is so important that a number of industries regulate its purchase. Insurance Brokers, for example, are required to have a current Professional Indemnity Insurance policy in order to hold a valid license. Without this coverage, any insurance broker cannot be authorized to carry out business.

Professional Liability protection is a type of insurance which you hope you never need to use, but if you need it then it becomes vital.

Liability Insurance in Hong Kong

There are many different types of liability risk that you will encounter throughout life, and even more if you are a business and have to consider customers interacting with your organization every day. Knowing what type of liability risk you are exposed to can be difficult, as can building the right insurance portfolio to insulate yourself from those risks.

CCW Global has a team of expert insurance brokers ready to assist you with finding the perfect package of insurance. With our no-risk, no-obligation consultation process, we ensure that you pay only for what you need.

To learn more, or to speak with one of our brokers, please Contact Us Today.

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