Public Liability Insurance: Meaning, How It Works, Pros & Cons

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A more modern name for general liability insurance is public liability insurance. You have a lot on your plate as a small business owner. The last thing you need is for a stressful situation to compound the strain of managing every part of your organization. Consider the following scenario: A client or potential client walks into your office, trips over a piece of paper, gets hurt, and demands that you answer for it. These types of situations are very likely to occur if you or your company interact with customers or other third parties in person. This is why one of the most crucial insurance options for businesses is public liability insurance. Let’s examine public liability insurance in greater detail, including its principles, types, coverage exclusions, potential applications for businesses, and available alternatives.

Table of Contents

What is Public Liability Insurance?

Public liability insurance coverage typically covers legal costs and expenses incurred in your defense, as well as damages and costs that may be awarded, if you allegedly injure an individual (who is not listed as an employee) or damage their property in the course of your business activities.

An insurance policy known as “public liability” covers any bodily injury and property damage to a third party caused by the policyholder or on the latter’s premises. However, it is frequently referred to as “commercial general liability insurance,” which combines both public and product liability insurance coverage.

For instance, a client who comes into your office stumbles on a damp floor, breaks her ankle, and needs to be hospitalized. What if this results in a responsibility stemming from harm? For this reason, it’s essential to ensure your company with public liability insurance.

It is crucial for company owners, hospitals, and even doctors to have public or third-party liability insurance. Businesses and individuals who may be held liable for obligations under the law or financial obligations, in addition to other pertinent matters, typically purchase liability insurance policies.

Types of Public Liability Insurance

The various types of public liability insurance are listed below:

Godowns, warehouses, and other production facilities subject to public liability
Public liability for businesses that don’t make things, such as BOPs, IT companies, hotels, restaurants, schools, clubs, etc.
Businesses that deal with potentially dangerous substances are subject to the Public Liability Act of 1991.

How Does Public Liability Insurance work?

The last thing you want is for your business to cause harm to someone else, yet no matter what area of work you are in, there are always hazards involved. There is a chance that something could go wrong if your business entails interacting with customers or clients.

This could be a simple slip-up that only slightly harms someone’s property, or it might be a fatal accident. Whatever the situation, there is a potential that someone will file a lawsuit for damages if they believe they have been hurt by your business operations. If you are found legally liable, you may be required to make significant financial payments. Fortunately, this is where public liability insurance comes into play. Your provider will cover any additional costs if you have insurance, protecting your bottom line.

What Does Public Liability Insurance Cover?

The following are covered under public liability insurance:

Body injury: If someone is hurt, public liability insurance might aid with costs.
Property damage: It assists in paying for damage to a third party’s property. Let’s imagine that you run a convenience store and one of your staff members unintentionally spills coffee on a client’s high-end handbag. If the purse and any damaged contents need to be replaced, your insurance policy can help with the expense.
Legal expenses: This coverage extends to the price of engaging and paying an attorney to represent your company in a lawsuit brought by a client or another third party.

Keep in mind that only your commercial property is covered by this insurance. Public liability insurance may not offer sufficient protection if you or your staff interact with clients in other locations, such as their homes.

What Does Public Liability Insurance Not Cover?

The claims originating under the following circumstances are not covered by public liability or commercial general liability insurance:

Professional errors: Only liabilities resulting from third-party harm, property damage, disability, etc. will be paid by the insurer. You should purchase professional liability insurance to cover any type of professional mistakes.
Damage to Commercial Property: The front portion of your office has been damaged by a sudden fire outbreak. Only third-party liability damages will be covered by compensation.
It also excludes damages brought on by war or a scenario that could lead to one.
Any intentional or purposeful harm is not covered by the policy.
Ionizing radiation-related damages are also not included.
Damage resulting from fines, penalties, or exemplary damages is not compensated

Who Must Have Public Liability Insurance?

Public liability insurance is not compulsory, but it can be if your specific circumstances, the nature of your firm, and the industry you operate in make it necessary. Find out what the particular requirements of your legal system are, and make sure you have protection in case it becomes necessary.

However, you can believe that a claim will not be made against you or your company, but if it is a possibility, you should take it into account. There aren’t many business kinds that can excuse not purchasing public liability insurance.

If any of the following apply, you should think about obtaining public liability insurance:

Public visitors, clients, or customers stop by your location
You go to another location or work there
Your actions occur in public settings

Public liability is no longer just about providing financial protection against claims; many customers now want certification documentation when awarding work, making it a question of business acumen.

What are the Pros and Cons of Public Liability Insurance?

Here are some pluses and minuses of having public liability insurance:

Pros

It covers some of the most prevalent claims, including client slip-and-falls and other on-premise client accidents.
It covers harm to the property of third parties.

Cons

Finding an agent, broker, or carrier willing to write this policy is challenging because of its restrictions
It is often difficult to comprehend
Protection is restricted to only bodily harm claims and damage to other people’s property.

Conclusion

After reading this article, you should have a better knowledge of public liability insurance. Public liability will nonetheless shield your company from third-party claims for bodily harm or damage to their property, although it isn’t as comprehensive as other forms of insurance. This makes sure that in the event of a claim, the expenses of legal defense, court, settlements, and legal damages won’t have to come out of your pocket.

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