A liability policy is an insurance contract that protects individuals or businesses from financial loss due to claims by third parties for injury, damage or other losses caused by their negligence. It covers legal fees and damages awarded against the policyholder in such cases. Liability policies are commonly taken out by businesses as a way of managing risk, but can also be purchased by individuals for personal protection. The specific coverage varies depending on the type of liability insurance, which may include general liability, professional liability or product liability among others.