Is It Necessary to Have Contingent Liability Insurance?

Contingent liability is an insurance policy that can be taken by the business owner only when he is held liable for any bodily injury or personal injury, property damage that has been caused by the business when the owner of the business happens to be in contractual relations with another party. This liability insurance is also called as indirect liability which the business owners face while running their company.

Generally contingent liabilities may or may not be faced by the company, so the likelihood of loss is described as probable, remote or reasonably possible in the balance sheets of the company. Also the ability to estimate this type of loss is described as known, reasonably estimable, or sometimes not reasonably estimable.

In a contractual business, the owner of the company can be held liable for his indirect involvement in an incident resulting in personal or bodily injury, advertising injury, property damage due to the contractual party. If a third party has suffered and claimed against the result of the actions of the business owner's contractors or subcontractors, other agents, the owner of the business is likely to be held liable together with the party who is primarily been responsible for the incident.

Contingent liability is something similar to general liability insurance which provides coverages against all kinds of liabilities, loss or exposure. This insurance is needed for those businesses who are likely to get contracted with the other parties, so this policy is designed specifically for businesses working with independent contractors. Thus for the businesses which are exposed to risk of contingent liability are considerable to take adequate insurance.