Bharti AXA INSURANCE GLOSSARY Liquidated Damages Any damages for which the compensation amount is decided upon in the contract as known as liquidated damages. When the extent of compensation is not predetermined and the amount recoverable is decided on by a court or tribunal, the damages are said to be “at large”. For example, in car insurance the damages awarded in case of car theft are pre-determined to be the sum assured, whereas third-party liability maybe determined by a court tribunal. Therefore, theft is a liquidated damage whereas accidental damage to a third-party is damage at large. Liquidated damages are differentiated from penalty as the main purpose of penalty is to secure the performance of the contract. A penalty is higher than the estimated loss amount whereas liquidated damages are compensatory in nature and are based on genuine estimate of loss due to an uncertain event. The main purpose of fixing a pre-determined amount for liquidated damages is: It reduces calculation error It facilitates the recovery of damages suffered It decreases the inconvenience and expenses to the parties involved as they do not have to prove the extent of actual damage or loss Reduces the risk of under compensation in case of a breach of contract and avoids the need for assessment. Request Call Back Category * - Select -CarTwo WheelerHealthTravelPersonal Accident Buy Renew Claim submit Related Posts Disclaimer : The information published on this website is for the public's reference only. Content of this information is to provide an overview of your Travel needs and should not be relied upon for personal, medical, legal or financial decisions and you should consult an appropriate professional for specific advice. Bharti AXA General Insurance Company Limited makes no representations about the suitability, reliability, timeliness, and accuracy of the information, travel, services, or any other items mentioned on this subject for any purpose whatsoever.