What is Public Liability Insurance?

Public liability insurance is one of the most common types of insurance that small businesses get to protect themselves and their assets. Just like having homeowners’ insurance to protect you if someone gets injured in your home, a business should have public liability insurance to protect themselves if someone gets hurt at their business.

The Purpose

The purpose of public liability insurance is to protect against the risks of liabilities imposed by lawsuits of similar claims.  It protects the insured business in the event that they are sued.  The goal of the insurance policy is to defend the business in court (or other format) should they be sued for a claim.  Furthermore, the insurance policy will typically provide coverage to pay any claims that are levied against them, thus protecting the business from having to pay them.

Who Needs It?

While affordable public liability insurance is one of the most common types of business insurance, many small businesses do not get coverage when they should.   Public liability insurance covers a wide variety of issues that have the potential to affect third parties. For example, if your business has any interaction with members of the public, has visitors, deals with subcontractors, or handles the personal property of anyone, you could be opening yourself up to third-party liability.  That is where public liability insurance can really help.

If you think you need it, you should consider your potential risks in dealing with the public.  Those at greatest risk are companies where large numbers of people come onto their premises: retail stores, restaurants, theaters, sporting venues, hotels, and more.

However, even if you don’t invite the public onto your property (say you have a home repair service), you still could be liable if you damage someone’s personal property.  So, repair businesses should also consider getting public liability insurance.

Finally, you can be liable even if someone gets hurt but wasn’t invited onto your property.  For example, if you have a skateboarder who breaks their arm on the pavement in front of your office, you could be liable as well.  That’s when you should consider getting a public liability policy.

How it Works

The policy actually works in a couple of ways.  First, the insurance policy will defend your company in court against any claims.  The legal costs of a defense do not normally affect policy limits unless the policy specifically states it.

The policy will then try to settle all reasonable claims, up to the set policy limit.  For example, if you have a £50,000 policy, that amount would be the maximum the policy would pay. Many companies try to save costs on their liability insurance premiums by having what is called a self-insured retention, which is like a deductible on the policy.  This means that the company will cover themselves for smaller claims, and only use the policy for larger claims, thus saving money.