What is Public Liability Insurance?

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Public-liability-insurancePublic liability insurance offers protection against claims from people in the public that have suffered injury or property damage due to your business. If someone is injured on your own property you might be held liable. For instance, a customer can slide on the wet floor and sue you for damages.

Public liability insurance is designed to pay for damages which might include loss in earnings, future loss of earnings and damages paid to the applicant in addition to your costs in defending the claim and the applicant’s legal costs if you are found to be wrong.

Claims can be made due to any sort of accident inside or outside your business premises – perhaps when you are working on a construction site or on a sales visit, for example. Some customers or clients might also ask you to present evidence of liability insurance before they start working with you. This really is quite common especially when working with local authorities, so you must remember this.

Product liability

Normally, this is part of your public liability insurance policy and is essential if you are selling products or equipment through your business. It will cover you for claims of property damage or bodily injury due to faulty products supplied by your business.

Is it mandatory to have public liability insurance?

While public liability insurance will not be a legal requirement for some companies, it should be deemed necessary if members of public interact with your company in any way on regular basis- from customers receiving deliveries to customers visiting your workplace or work premises. Which means that even home based businesses should think about having public liability insurance if their house office is used for meeting people. Home based businesses manufacturing and supplying products might also get sued by customers who think the product is not up to their satisfaction.

What does public liability insurance cover?

This insurance covers a wide range of situations, but most of the time, a general liability insurance policy will protect your business if a person is injured in any way due to your business, or if perhaps you damage someone else’s property at work. Keep in mind that even a small scratch on personal property can lead to hefty fines, and you will have to pay attorney’s fees when the case would go to court. All such fees are also covered by your public liability policy.

Whenever you take out public liability insurance, you have to tell your insurer about the type of business you have. This isn’t just for the records, but can help you find a policy that best suits you.

Who else will be covered by a public liability insurance policy?

An over-all liability insurance policy should cover your business, its subsidiaries, employees, director and partners, while they’re acting within the scope of their duties.

Does public liability policy cover external events?

Public liability insurance covers external events that are part of your normal business operations. If you are unsure whether an event is covered, call your insurance company for additional information or even to arrange additional protection.

Here are some of the cases where you can avail the benefits of public liability insurance…

  1. During one of your company event if an audience member slips on a piece of loose wire. Public liability would cover your company in the event he claims for damages.
  2. A pipe bursts in a store room where customers used to keep their bags and harms a customer’s laptop beyond repair. Public liability insurance would cover any claims by such people. (This example would only apply in case you are the owner of the property.

Factors affecting the cost of public liability insurance

Two main factors generally affect the cost of your public liability insurance…

  1. The kind of business you are running
  2. Size of the business you have

These factors will assist you to establish your base premium, but there are some other elements that could still come into play. These include unusual business activities that you often undertake.

Business size

The size of a company affects the cost of your public liability insurance. A company with a big staff or more revenue is normally considered to have a high probability of making a claim. Some insurance providers measure the size of a business according the employee strength while some consider annual revenue as a measure.

Business type

The kind of business activities you undertake will usually have the largest impact on the premiums of your public liability insurance. Insurance providers have access to massive research and information that tells them about various risk factors affecting businesses. This allows them to know how much risk different business forms have. A business entity like a consultant who works from home will have a much lower risk and premium compared to businesses where manufacturing is involved.

In summary

Public liability insurance is a general mechanism ensuring that the injured people are compensated well for their injuries. Since this is a general mechanism including a very wide variety of risks and circumstances, it is complicated and difficult to understand.

In every type of business, there exists a probability of something going wrong. Basically, your business will be held liable for any accidents that happen. Irrespective of your business size, Public Liability claims can prove to be extremely costly. Even if you have not done anything wrong, you might still have to bear significant legal costs while defending your stand. Public liability insurance is suggested for anyone operating a revenue generating business. Purchasing a good policy can give you reassurance that your business will be protected no matter what life throws to you.

Do not assume that you may be safe without a liability policy just because you operate a small business, or because you do not do deliver goods directly. Something as small as a coffee spill on a customer’s computer, or perhaps a loose nail causing a customer to slip when visiting your workplace, can make you pay thousands for damages. A good public liability insurance can save you from all such disasters.

About the author: Kelly Francis is an insurance expert from Sydney, Australia.

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