Public liability insurance is an insurance product that protects a business against claims made by any member of the public who is injured on the property of the business. The injured person could be a customer, visitor, sub-contractor or even a trespasser who is injured or has their property damaged. Public liability insurance will also cover the policy holder if he or she damages a client’s property at their place of business.
The most at-risk businesses are places where a large number of people visit including shopping centres, pubs, theatres, clubs, hotels and sporting venues. However, there is the possibility of an accident in even the smallest of places, and the cost of a claim, which would include NHS medical costs, could be enough to close a small business.
What does Public Liability Insurance Cover?
There are several business liability insurance products that cover a broad range of situations. The main coverage is for loss of earnings and damages awarded to the claimant as well as any legal costs for the business or claimant depending on who wins the court case.
Public liability insurance will cover an accident on the business premises as well as outside the premises in certain cases. If the policy holder or their employee is working on a construction site or on a sales visit, their insurance will cover any accident or injury sustained there.
Many companies or customers require any business with which they work to supply proof that they have public liability insurance. This is particularly true when working with local authorities.
The first thing to consider is how much coverage a company should have. It can be very disadvantageous to be under-insured. One million pounds is usually the minimum, but high risk industries will require much more. Small to medium enterprises (SME) usually have a maximum limit of 10 million pounds. A SME is a business that employs less than 250 people and has an annual turnover of less than 50 million euros.
Choosing the Right Policy
There are some points that should be considered when choosing a public liability insurance policy.
- Are the right types of situations covered? For example, working from heights, slip and fall, dropped items, extreme heat.
- What are the endorsements and exclusions? Exclusions will make the policy less expensive, but may exclude essential coverage. Endorsements will add coverage that is not already included in a standard policy.
- Is the level of coverage acceptable for the business as well as the requirements of clients?
- What is the cost of the policy? This will depend on the amount of coverage, the risk involved and the size of the business.
What is not Covered?
Public liability insurance does not cover accidents that happen to business owners, their property or employees. This is covered by their regular business insurance policy. Business owners are required by law to have employer’s liability insurance if they employ one or more people. In some cases, this does not apply if the employees are family members.
A limited company is a legal structure where the company is a legal entity that is separate from its directors. This means that the directors’ liability is limited to their initial investment in the company.
How to Reduce the Cost of Public Liability Insurance?
As mentioned earlier, the cost of insurance partly depends on the risk the business has. If the risk is reduced, the cost will reduce. For example, safety measures can be taken as well as security measures. The insurance company will advise a business how to reduce their risk factor.
A new business will have higher premiums. A start-up company will pay more for coverage the first year of business. This will lower every year they operate.
It is recommended to get quotes for public liability insurance from several companies. It is a highly competitive industry, and the cost for the same coverage may vary a lot from different companies. There are websites where quotes from most of the major companies can be compared. There will be insurance companies that are less well known than the major companies, but they may give better value for money.
Raising the excess that needs to be paid by the policy holder before the insurance company starts paying is one way to reduce the cost of the premium. This should be carefully considered because a high excess may negate the initial savings and cost more in the long run.
Reducing the coverage will also reduce the cost of the premium. This is only a good way to save money if the key areas have the necessary coverage.
A Claim Example
The employee of a small shop washes the floor and does not warn people that the floor is wet. A customer walks in unaware and slips on the floor and breaks an arm. The injured customer may sue the shop and would most probably win the case because the injury was caused by the regular business activities as well as negligence on the part of the employee.