Liability insurance is risk financing insurance for the protection of the insured against liabilities that can be imposed by lawsuits. With liability insurance, payments are made to people who suffer a loss because of the insured or his/her business. All businesses that deal with clients, customers and people from the public sector should have liability insurance, and if these businesses have employees, then having employer’s liability compulsory insurance is a legal requirement. Not only is it considered to be good business sense to get liability insurance but prospective clients and customers may insist that a company have liability insurance before they will do business with that company.
Public liability (PL) insurance is a specific type of liability insurance that pays compensation on behalf of industries and businesses that are involved in operations that may cause property damage or physical injury to members of the general public. Businesses that have heavy public traffic on the premises have the greatest potential for PL risks and therefore should secure PL insurance. Examples of these types of businesses are hotels, shopping centres, theatres, clubs, pubs and sporting venues. If shows, events and alcohol consumption are included, it will increase the risks for public liability. Some insurance companies offer a package that includes both PL and employer’s liability compulsory insurance together, and some insurance companies like the publicliabilityexperts.co.uk offer PL insurance as standard cover under some of their other business insurance policies.
Costs of Public Liability Insurance
The cost of PL insurance depends on the following factors:
- The type of business that’s being insured;
- The location of the business that’s being insured;
- The class of insurance that will be chosen for the insured which is determined by the degree of probable risk involved within the business’ operations;
- The number of people that will need to be insured; and
- The level of activity in the businesses.
For risks that are considered as small- to medium-sized, insurers may use what is called a book or average rate, which uses rates that are calculated according to past claims that have been paid out to similar businesses. For larger businesses, the rate may be calculated according to those businesses’ claim records over a stipulated number of years. Once an estimated rate has been determined, the insurer may adjust the rate according to past claim risks, and whether or not the business operates under a good risk management program with sufficient health and safety rules in place.
Business owners can obtain PL insurance that furnishes £1,000,000, £2,000,000 or £5,000,000 of coverage. Coverage for higher amounts is possible under an excess of loss policy.
What Public Liability Insurance Covers
PL insurance covers the following:
- Any awards for injuries, losses or damages suffered by members of the public that are caused by the insured or his/her business;
- If cases proceed to trial, PL insurance will pay a specified amount for legal fees incurred for expert witnesses, solicitors, accountants and barristers, in addition to other court costs;
- Other costs and expenses that are related to the claim; and
- Hospital treatment and cost of ambulances.
The Importance of Obtaining Public Liability Insurance
Over the years, there’s been an increase in the number of claims sought to satisfy complaints of damage and injury. Also, filing lawsuits has become more of a reality as a result of the advent of the “no win, no fee” cases that are offered by many barristers. Therefore, it has become imperative that business owners protect themselves against the significant financial losses that can result from these lawsuits. If business owners do not have insurance and they are sued, they risk not only possibly losing their businesses but depending on the size of the lawsuit, they may even risk losing personal belongings such as their homes and other assets they may possess if their companies lack sufficient funds to settle the claims.
Comparisons can be done on the types of insurance available and quotes can be obtained by searching through the many online sites that contain this information. However, for all business owners who wish to purchase liability insurance but are unfamiliar with the facts and information involved, it’s advisable that in addition to doing online research, they should also consult with an insurance broker as well. They should discuss their specific needs with an insurance agent because there are various warranties, exclusions and conditions that are applicable when deciding on the cost of the insurance. Also, business owners should remain mindful of the fact that if they have employees, a statutory law compels them to obtain employer’s liability compulsory insurance, and failure to do so could lead to a fine of up to several thousand pounds per day.