Question 1

What is liability insurance in Iran and what does it pay for?

Accepted Answer

Liability insurance is a contract in which the insurer pays the bodily injury, property damage and legal-defense costs that the insured is legally liable to cause to third parties, up to the policy limit. The legal basis is the Civil Liability Act of 1960. Losses to the insured's own person or property are never covered.

Question 2

What is the difference between contractual and tort liability?

Accepted Answer

Contractual liability arises from breaching a promise written into an agreement, such as a contractor missing a delivery deadline. Tort or quasi-tortious liability exists independently of any contract and is based on law, such as injuring a passer-by with falling materials. Liability insurance mainly covers tort liability; contractual coverage requires an express agreement in the policy.

Question 3

How is liability insurance different from accident insurance?

Accepted Answer

Accident insurance pays the insured for their own bodily injury regardless of who was at fault. Liability insurance pays damage the insured causes to other people based on their legal responsibility. An employer may hold both: accident cover for workers and employer liability insurance for their own fault-based obligations. The two policies are complementary, not substitutes.

Question 4

What does a liability policy in Iran not cover?

Accepted Answer

The standard exclusions are intentional acts or knowing violations by the insured, criminal fines and penalties, damage to the insured's own property or employees unless expressly endorsed, activities outside the profession or scope stated in the policy, and losses involving alcohol or drugs. The full list is set out in the general conditions, which must be read before issuance.

Question 5

Does liability insurance cover moral (non-economic) damages?

Accepted Answer

Under Article 1 of the Civil Liability Act, moral damage such as harm to reputation can be claimed, and courts sometimes award it. Whether the policy pays depends on the general conditions and endorsements: if moral-damage cover is not expressly included or added by endorsement, the insurer has no obligation to pay such awards.

Question 6

Are legal defense costs covered by the policy?

Accepted Answer

Yes. Besides the main compensation, the insurer also pays the costs of defending the insured in liability proceedings — attorney fees, court and expert expenses — within the limit the policy conditions set for this heading. This matters even for unfounded lawsuits, because defending yourself is costly. Some policies assign legal-defense costs a separate sub-limit.

Question 7

How is the premium of a liability policy calculated?

Accepted Answer

The premium is set from the approved rate for each line of business and risk, the chosen limit of liability, the insured's claims history, the declared scope of activity and any endorsements. Higher-bodily-injury occupations carry heavier rates. No universal figure exists: the final premium is issued upon official quotation by Bimeh Iran based on your declared risk.

Question 8

How should I choose the limit of liability?

Accepted Answer

The accepted starting point is the full diyeh of the year of occurrence, because the heaviest realistic loss is usually the diyeh for death. Riskier professions and projects with several potential claimants choose a multiple of that figure. A limit below the full diyeh leaves the shortfall on the insured, while an excessive limit raises the premium needlessly.

Question 9

Why do two similar businesses receive different liability rates?

Accepted Answer

The rate is not a function of the business title alone. The chosen limit, previous claims files, staff size and type, safety equipment, the location of the premises and any endorsements all feed the underwriter's assessment of each applicant, so two similar businesses can legitimately receive different quotations. The only valid comparison is official quotations with identical declarations.

Question 10

How quickly must a liability incident be reported?

Accepted Answer

The insured must notify the insurer at the first opportunity and within the period stated in the policy, which is usually a maximum of five working days. If late notification makes it harder to establish the cause or the size of the loss, payment can be reduced or rejected, so reporting promptly is advisable even for unclear incidents.

Question 11

What can I do if the insurer rejects my claim?

Accepted Answer

First obtain the rejection reason in writing. If the problem is curable, such as missing documents, supply them. Over the amount of loss, settlement or referral to a jointly appointed expert is possible. Ultimately, the insurance disputes commission or a court action under Article 30 of the Insurance Act of 1936 is the legal route.

Question 12

What happens if the damage exceeds the policy limit?

Accepted Answer

The insurer pays only within the limit of liability stated in the policy, and any remaining amount stays with the insured, whom the injured party can pursue directly. The deductible, if any, is also borne by the insured. This is why the recommended minimum limit equals the full diyeh of the year of the incident.

Question 13

Which documents are needed to issue a liability policy?

Accepted Answer

Issuance requires a completed risk declaration form, evidence of the activity such as a business license or professional permit, identification documents, and the expiring policy if you are renewing. Project policies additionally need the contract or employer's specifications. The underwriter confirms the exact list for your risk during the quotation process before the premium is finalized.

Question 14

Should I renew my policy or buy a new one?

Accepted Answer

Renewal continues the same policy into a new period while preserving your claims record and applying any no-claim discount; the limit and endorsements can still be revised at renewal. Buying anew creates a fresh contract, and any gap between the two policies can erase your history and discount. Renewing before expiry is strongly recommended.

Liability Insurance in Iran — Frequently Asked Questions

Basics of liability insurance

Coverage & exclusions

Pricing & limits

Claims & disputes

Buying & documents

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