Understanding The Basics Of Public Liability Insurance

Business, claims and litigations go hand in hand, but that doesn’t mean that there is no way in which a safeguard can be taken against these potential risks. Public liability insurance is the perfect armor which has the capability and the required elements to save a business from claims made both by clients and third parties. Since it is not legally mandatory to purchase this policy, as is the case with the employee’s insurance policy, most company owners are either:

  • Not aware of this policy or
  • Are aware but uninformed about its importance.

It is only when they come face to face with a claim that they start understanding what public liability insurance can do for them. But why wait to incur a loss when the simple payment of regular premiums can save the company from huge financial losses!

What is public liability insurance?

As the name suggests, it is an insurance policy that needs to be purchased by businesses and tradesmen as a safety precaution against the possibility of accidents occurring. Since accidents are a common occurrence in most businesses, they are always vulnerable to claims raised either:

  • Due to property damages incurred or
  • Physical harm sustained as a result of the daily routines or procedures of the workings of the company.

In both instances the fault of the company is a possibility which can be proven in a court of law or there can be an outside settlement to do away with the hassles involved. Public liability insurance enables a company or a business to recover almost all costs incurred in the whole process, thereby saving the company from financial losses.

What does public liability insurance cover?

Public liability insurance covers almost all liabilities that can occur in a company’s daily interaction with either the general public or its own clients. Hence it covers:

  • All costs incurred in the repair and maintenance of damages done to the property of a third party or a client,
  • All medical costs incurred in instances of a third party or a client suffering bodily harm due to the workings of the company,
  • All fees and other expenses incurred in taking the claim to the court of law till such time as the legal proceedings do not get over completely.

Thus this insurance protects the interests of the insured party by ensuring bogus claims are thwarted in the court of law and genuine claims given their due without a legal claim.

However, this insurance does not cover any damages incurred when an employee of the company is involved in an accident. This comes under the purview of the employee’s liability insurance, which is a must for every company to have. Hence it is important for the insured party to understand the risks involved in the business before applying for a public liability insurance policy.

Costs involved in its purchase

As is true with every other insurance policy, premiums need to be paid regularly in order to keep it active. The amount of the premium depends on several factors like:

  • Risks involved in the business whereby the riskier the business, the more will be the premium amount for the same coverage as opted for by a less risky business,
  • Size and total turnover of the business concerned also has a bearing on the premium amount to be paid since more employees means bigger business which will require a higher coverage and hence the company will have to pay a higher premium,
  • Nature of the business plays an indirect role in the calculation of the premium amount since the coverage required by a business in the services sector will be different from one involved in the education sector or the retail sector,
  • Actual coverage required is the best yardstick for calculating the premium to be paid.

However, it is a general rule that for a higher level of coverage, the amount of premium to be paid is also higher. The standard premium generally starts from 53 to 55 pounds a year for 1million pound coverage, approximately and this can also be paid out in installment plans if requested by the insured party. Of course the terms and conditions for these premiums which are paid in installments are determined by the insurer in a case to case basis. The installment rates are generally very competitive and pro-client so that the insured person or company can avail the benefits of the policy without taking on an additional financial burden.

Can self-employed people use this policy?

The best part of public liability insurance policy is that it can also be purchased by people who are self-employed like fashion designers, hair stylists, and artists. The insurance provider will always have a list of self-employed occupations that it covers and in case a professional occupation is not listed in the same, special sanctions and permissions can always be sought and granted.

In fact people involved in up to 3 trades or businesses can avail the same policy for all of the above. The option for the same, however, needs to be selected when opting for a public liability insurance online. For people involved in more than 3 trades, again special permissions have to be sought which are given depending on the viability and profitability of the trades concerned.

Melissa Thompson writes about a wide range of topics, revealing interesting things we didn’t know before. She is a freelance USA Today producer, and a Technorati contributor.