It is common for small businesses to assume that a public liability insurance is an expensive policy that they don’t have to purchase. Indeed, this is one of the misconception that may end up destabilizing an SME in the event of a claim against it. A public liability insurance is a policy that cover the costs resulting from a claim of property damage or bodily harm presented by a third party. Accordingly, this article will present the crucial information that small business owners need to have regarding the public liability cover.
In the UK, businesses are not required by law to have a public liability coverage. While this may sound like a relief for the small businesses working with a limited budget, the losses that may arise from liability claims make it one of the crucial policies that every business owner should have.
- The insurance is expensive
This mistaken belief is usually founded on the reasoning that a claim may equate to thousands of pounds. However, one should realize that the business of insurance operates on the principle of volume. Insurers sell public liability coverage to numerous businesses; an aspect that makes the policy affordable to firms of all sizes. Additional, the policy is not a one-size-fits-all. You can compare the details of the cover offered by different insurance companies and select an affordable option that suits your needs.
The policy covers financial losses
This assumption is not necessarily true. On the one hand, the policy may cover financial losses resulting from damages or injuries on a third party. However, it will not be applicable if the claim is purely for financial loss. For instance, an electrician could be dealing with an electrical hitch in a client’s office and he informs the customer that he has to switch off the power for 20 minutes.
However, the task takes longer than expected and the client has to stay for 3 hours without electricity. The customer then claims that he lost 100,000 pounds in revenue during this period and expects you to reimburse the amount. In such a scenario, your public liability insurance will not be applicable since the issue does not relate to property damage or bodily harm on a third party.
The policy is only necessary for ‘manual’ occupations such as construction firms
Granted, there are some businesses that are at a higher risk of liability losses. However, it is important to note that firms of all sizes and sectors can be subject to liability claims from third parties. For instance, most people categorize the IT sector as a ‘professional’ rather than ‘manual’ occupation. However, it is possible for a customer to present a claim against the firm for tripping on a laptop bag placed on the floor. Depending on the extent of injuries and purported losses, the resultant costs may destabilize the small IT business. For this reason, business owners in all sectors should purchase a suitable public liability policy.
You will need to purchase a new public liability policy for each new contract
One of the reasons why contractors running small businesses shy away from purchasing a public liability insurance is due to the mistaken belief that they need a different policy for each contract. This is not true since a typical policy is flexible enough to cover all your business undertakings with reference to liability claims. As the business grows, your insurer will most probably allow you to modify your current policy to suit your changing needs. The only time that you may be required to buy a new policy rather than renewing the one that you already have is if your new project is highly complex and involves huge risks.
Small businesses should consider purchasing a public liability insurance especially if they fall under the following categories:
- You have a physical business office that the public visits
- Your firm hosts or organizes events and other activities
- You operate from home and allow clients to come over
- You work in an area where the public can access. This includes a client’s site or the street
- You intend to open a store within a craft fair or market
One of the misconceptions that some small business owners have is that they don’t need a public liability insurance if they already have a professional indemnity policy. While both types of insurance cover compensation claims, they have differing features. On the one hand, a public liability insurance will come in handy if the claim is made by a third party against your business for property damage or bodily harm. For instance, a client may fall on a wet floor in your office and hurt her arm. In contrast, a professional liability policy covers mistakes that you may have made when delivering your services. Simply put, the latter entity focuses on your firm’s work.
A public liability policy will cover the legal, administrative, and compensation costs in the event of the following claims:
- Property damage: the cover will come in handy if you or your employees damage some else’s property.
- Bodily harm: if a member of public, who is not your worker, presents a claim against your business for an injury sustained within your business, the policy will be applicable.
- Violation of a third party’s intellectual property rights or harm through advertising: someone may present a claim against you if you make an advert that defames them or if you infringe their intellectual property rights.
- Reputational damage: it is possible for a business rival to sue you for allegedly publicizing an advert or interview that negatively affected their business. In such a situation, the public liability policy will cover the incurred costs.
- Damage on your firm’s property: the public liability insurance only covers damage on a third party’s property. To protect your own property, you need to purchase a commercial property insurance.
- Injury on a worker: to cater for the resultant costs, you will need to have a worker’s compensation policy.
- Mistakes made when delivering your services: a public liability insurance has different features from a professional indemnity policy. As such, the latter insurance is needed to cover errors made in the course of your work.
A public liability insurance is not just meant for large firms. In fact, the cover is a must-have for small businesses since a liability claim may result in large losses that the enterprise may not handle. It is important to note that the policy only handles claims of property damage, body injuries, or reputational damage by a third party. This does not include damage on the property of the business owner, injuries on a worker, or errors made when delivering your professional services.