Damages

What Does Damages Mean?

In the context of insurance, damages refer to the monetary compensation one party must pay to another when the former is found responsible for causing a loss or injury to the latter. Various insurance products offer financial protection against different types of damages. Drivers who cause an accident, for example, are typically on the hook for the other party’s medical bills and vehicle repairs, so figuring out how much liability insurance you need is worth doing before settling on a policy.

Insuranceopedia Explains Damages

There are three main types of damage:

• Compensatory damages are intended to restore the injured party to the position they were in before the wrongful act. These include compensation for bodily injury, property damage, consequential damages, and general damages.
• Nominal damages are small, symbolic amounts awarded to acknowledge the defendant’s wrongdoing when the plaintiff cannot demonstrate significant loss.
• Punitive damages go beyond compensatory damages and are designed to punish the defendant for particularly egregious misconduct.

Businesses face a similar issue when customers or other third parties get hurt on their property or by their products, and that is the main reason small companies buy general liability insurance.

Understanding the coverage provided by a liability insurance policy is crucial to minimizing exposure to these types of damages.