Public Liability Insurance — Do You Know What It Is and Why You Need It?

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Public Liability Insurance — Do You Know What It Is and Why You Need It?

See how we're different

Public liability insurance is one of the most common types of insurance coverages that small businesses obtain. However, some may confuse public liability insurance with general liability insurance.

For this reason, knowing the difference between the two is crucial, as business owners do not want to buy the wrong type of insurance.


The Difference between Public Liability Insurance and General Liability Insurance



Public Liability Insurance

Public liability insurance or PLI protects business owners and their assets in the event of losses related to property damage or loss, injury, and losses incurred by the public or third party while on the property. This includes visitors visiting an office building, delivering packages, and customers shopping or looking around at a retail outlet.

For most businesses, pubic liability insurance is the starting point, especially for business owners working in the retail or public service sector. It offers minimum business insurance coverage.


General Liability Insurance

General liability insurance or GLI covers a diverse range of potential problems that business owners may experience. General liability insurance includes aspects of public liability insurance coverage or coverage related with a standalone public liability insurance coverage.

General liability insurance protects business owners against liability resulting from accidents at the workplace, defective products, negligence, and injuries to both people and employees on the property. A general liability insurance coverage covers legal and medical expenses. States and municipalities may require business owners to take out general liability insurance before they can obtain their business operate license.


The Strengths and Weaknesses of the Public Liability Insurance and General Liability Insurance


Public liability insurance offers business owners with minimum coverage, covering the liabilities against claims of negligence, accidents, and injury made by the public. These types of policies are not that expensive to obtain, but affordable.

The one drawback business owners will receive is that public liability insurance’s limited coverage only covers claims made by the public, not investors, employees, or vendors. If the expense exceeds public liability coverage, the business owner will have to pay the remaining amount.

Conversely, general liability coverage is a more comprehensive policy that protects business owners from claims made by the public, vendors, investors, and employees. In terms of cost, general liability coverage — since it covers more — is more expensive than public liability coverage.

In fact, this is one of the reason why most small and medium-sized business owners tend to settle for buying public liability insurance instead of general liability insurance due to the difference between the costs of each. If the risks involved are greater, meaning the need for a more comprehensive coverage is greater, you might benefit more from obtaining general liability insurance than public liability insurance.


Can You Switch from Public Liability Insurance to General Liability Insurance Later?


Short answer, yes. Business owners who are just starting out can buy public liability insurance and switch to general liability insurance when they can afford it. If you are start-up or on a tight budget, a policy is better than no policy.

For this reason, you should consider obtaining public liability insurance and then when your business become more stable and you can afford a more comprehensive coverage, you can switch to general liability insurance.

If you are considering buying public liability insurance for now, it is important you learn more about it.

Factors that Influence the Cost of Public Liability Insurance

The factors that influence the cost of public liability insurance include the size of your business, deductible amount, and the risks related with your industry or business. The biggest factor that influences the cost of public liability insurance is the type of industry your business operates in.

For instance, your business falls into the construction industry. Businesses operating in the construction industry may have to pay higher premiums than business not operating in the same industry as theirs. This is due to the use of heavy machinery and that they work in public locations. Business owners in the retail industry may find themselves in the same boat as business owners operating in the construction industry.

Retail business may have to pay higher premiums due to foot traffic, which increases the risk of injuries such as slips and falls.


Should You Apply for Public Liability Insurance?

When you are applying for public liability insurance, here is what you need to know:


Confirm Your Business Only Requires Public Liability Insurance for Now

When you are debating on whether you should buy public liability insurance or not, consider the exclusions in the policy. As previously mentioned, public liability insurance covers property damage and third-party bodily injury, but does not cover personal damage such as advertising injury, slander, libel, or damage by first and second party.


Provide the Following Information Needed for Public Liability Insurance

When applying for public liability insurance, you need to provide the insurance company with the following information:

  • Name of business
  • Location of business
  • Contact information of business
  • Number of employees
  • Revenue estimates for the following year
  • Years of experience operating in the industry
  • Details about potential exposures to risks such as working with dangerous substances or operating heavy machinery
  • Prior history claims
  • Preferred coverage amounts with limits usually ranging from $500,000 to $2 million
  • Coverage requirements for leases, certifications, or contracts


Obtain Information about the Certification of Liability Insurance or COI

Lastly, you need to inquire about the certificate of liability insurance or CIO, which is proof that you have taken out liability insurance coverage. Most business owners, especially those who work in the public sector, need to provide the certificate of liability insurance before can begin work on projects or get licenses to work in their state or municipality.

So there you have it. We hope you have a clear an idea regarding what public liability insurance is and why you may need to take it out to protect your business.

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 Informational statements regarding insurance coverage are for general description purposes only. These statements do not amend, modify or supplement any insurance policy. Consult the actual policy or your agent for details regarding terms, conditions, coverage, exclusions, products, services and programs which may be available to you. Your eligibility for particular products and services is subject to the final determination of underwriting qualifications and acceptance by the insurance underwriting company providing such products or services. Statements on this website as to policies and coverages provide general information only. This information is not an offer to sell insurance.