If you are a business owner or an individual who interacts with members of the public, it is important to understand what public liability insurance is and how it can protect you from financial loss in the event of an accident or injury.
When the general public files a claim against your small business, this type of insurance helps pay for physical and bodily injury and damage to property claims against your company.
You may have heard of general liability insurance, which is similar but general liability insurance offers more coverage. Some businesses may consider public liability policy the “starter pack” of business insurance coverage, but you may also need to carry more insurance for your business.
We’ll look at the answer to “What is public liability insurance for business?”. We’ll also examine the cost, what it covers, how it works, other types of coverage you may need, and more.
What Is Public Liability Insurance?
Public liability insurance protects business owners and assets when the public experiences injuries, property loss or damage, and other losses while on your property. For example, the “public” might include visitors, delivery people, and customers who visit your business.
It explicitly covers the costs of these personal injuries, damage, or loss, but note that these incidents must occur on your property. Your insurance won’t cover your business if the incident occurs off-property.
Public liability insurance may be confused with general liability insurance, but they are not the same thing. In addition to physical and bodily injury and damage to personal property, it also covers personal and advertising injuries. Also, unlike public liability insurance, general liability also covers claims where someone is injured at their home by an employee of the business — it isn’t limited to just the physical location of the business.
How Much Does Public Liability Insurance Cost?
Public liability insurance may range from $500 to $1,600 per year. Several factors can influence the amount you’ll pay for this type of insurance, including your:
- Physical location
- Company revenue
- Risks, such as the number of people that walk through the company
- Claims history
- Coverage limits
- Deductible amount chosen
Note that general liability insurance costs more due to its broader coverage, such as its coverage for reputational harm.
What Does Public Liability Insurance Cover?
It’s a good idea to learn detailed information from the company that issues your policy. However, in general, public liability insurance covers the following:
- Bodily injury: This insurance covers expenses if someone injures themselves on your property.
- Property damage: Property damage covers damage to the property of a third party. For example, let’s say you own a paint store, and one of your employees hammers a paint can closed. The paint sprays out the sides onto a customer’s expensive outfit. Your policy may help cover the cost of replacing your customer’s clothing.
- Legal expenses: If the customer brings a lawsuit against your business (say that a customer slips on a wet floor in your business and you fail to warn individuals of the slippery conditions), your insurance company hires and pays for a lawyer to represent your business in a lawsuit.
This type of insurance does not cover a business’s employees, investors, or vendors. For example, it does not protect against claims from reputational harm, employee injuries, product or completed operations injuries, professional negligence, or alcohol consumption-related injuries.
Any amount that goes over the amount that the policy covers is the business owner’s responsibility.
How Does Public Liability Insurance Work?
A policy comes into play when someone files a lawsuit against your business. You file a claim with your insurance company when this occurs. As long as your policy covers the reasons for the lawsuit, your insurance company can cover your legal costs up to your policy’s limits. The money can then pay damages to the individual who filed the lawsuit if your business is at fault.
It’s a good idea to read the fine print on your policy and also ask questions of your insurance company so you know exactly what your policy includes.
Do I need Public Liability Insurance?
Experts suggest that businesses that regularly interact with the general population (whether through meeting with clients, customers, or other individuals on your business property) carry it.
States don’t usually require you to carry this type of insurance, but it can protect you in many different situations. It’s a good idea for businesses to also have the following types of insurance:
- Workers’ compensation (though the state of Texas does not require it)
- Disability, including long-term and short-term disability
- Unemployment insurance
Conclusion
Now that you know about the fundamental aspects of public liability insurance and the extent of its coverage, you may wonder whether it makes sense for your business. Consider how much foot traffic your business receives and whether you’re operating a budget-minded business or not. This type of insurance may fit the following types of businesses: Hair salons, coffee shops, bookstores, restaurants, local pharmacies, and more. Consult with an insurance agent to find out about the type of coverage you need.
Congratulations on thinking in the right direction — that your business must be protected. Read more about the reasons why you need business insurance on Sifter.
