Public liability insurance was developed to protect business owners and operators from the financial consequences of certain events that can happen in the course of running a business.
There are many different events covered by public liability insurance, however the most common claims involve the following:
- Damage to your client’s property
- Damage to another person’s property
- Financial loss as a result of your work
- Personal injury to your client or other person
- Death of your client or other person
- Financial loss to your client or other person
These events can come in many different forms.
Sometimes they are as an immediate result of your actions. For example you may spill a tin of paint onto new carpets, which will require replacement of the carpet at your cost. This is an example of a fairly minor claim which can be settled very quickly.
Other claims can be more involved and span a much longer period of time. For example you may build a deck for a client, and after twelve months the deck may collapse due to negligent work. In this case your claim would involve property damage, as well as personal injury or possibly death.
In any case, these situations will cost you money. In the first example it may be a thousand dollars or so for new carpets, whilst in the second example you could potentially be looking at a multi-million dollar court action for personal damages.
By having the right public liability insurance in place, you can avoid the devastating financial consequences of such events.
Public liability insurance takes the financial risk and responsibility away from you and places it with the insurance company. In return you must pay the insurance company an annual premium.
Who Needs Public Liability Insurance?
Public liability insurance should be held by any sole trader, partnership or company that has a potential exposure to property damage or personal injury. If there is any chance that you business could lead to damage or injury, then you need the cover.
For many businesses public liability insurance is mandatory. This is especially true in the trades and construction industry, where most subcontractors and contractors will need to show evidence of their insurance before they are allowed onto the worksite.
Public liability insurance is also required by law in order to operate certain types of businesses. For example in Queensland you must show proof of your public liability cover in order to obtain or renew your electrical contractor’s licence.
Levels of Cover
The amount of public liability insurance you require really depends on the specific needs of your business. Most commonly the levels of cover available are $5 million, $10 million and $20 million, however some insurers do offer differing amounts.
Many sole traders and small businesses opt for the basic $5 million level of cover, but it depends on the type of work you are doing. For people working in shopping centres and large commercial buildings often there will be a stipulation in the contract that a higher level of cover is required.
Although public liability does cover you for negligence, you still need to take responsibility and act in a professional way.
A good example of this is overspray. Although many policies will cover overspray damage caused when spray painting, you still need to use your good judgement and not spray paint on a windy day, without any protection and in close proximity to cars or other property which could be damaged by overspray.
Whilst your public liability insurance would possibly still payout in this situation, if the insurance company felt that you had acted recklessly they would likely not offer to renew your insurance at its next expiry. After one insurer has refused a renewal, you must tell any other insurance company about the refusal, which can often lead to them refusing you as well and leaving you without any insurance.
Of course it makes good business sense to always act in a professional way without any negligence, however mistakes do happen and that’s why we need public liability insurance.
Public Liability Insurance Premiums
The amount you pay for your public liability insurance is known as the premium. The premium is based on a number of different factors including the amount of cover you require, the type of business you operate, the turnover of your business and the number of people working for the business.
It is the type of business that generally has the biggest impact on the insurance premium. The insurance companies use their claims history as well as their industry knowledge and experience to judge which occupations and business types are most likely to result in a higher number and size of claims.
Skilled trades such as carpenters and electricians will generally attract fairly standard premiums, however the trades perceived to be higher risk, such as boilermakers, riggers and welders will almost always attract higher premiums.
Unskilled trades and professions can also attract higher premiums, however this really depends on the type of work. Although domestic cleaning is not classed as a skilled trade, the premiums are still quite low due to the low level of perceived risk involved.
Restrictions with Public Liability Insurance
There are certain types of work as well as work locations that are restricted by many standard public liability insurance policies, and you need to be aware of these restrictions when taking out a new policy.
Work locations such as airports, railway stations and mine sites are often excluded from standard public liability policies. Certain work may also be restricted based on size, for example residential construction or demolition higher than three stories is excluded from some standard policies.
Work on marine vessels over a certain size is also restricted by many standard policies, and in this case you will generally need a specialised marine public liability insurance policy issued by a specialist insurer.
Although there are a number of restrictions on standard insurance policies, the good news is that there are plenty of specialist insurers in Australia who can offer cover for almost any situation. These policies can tend to be a little pricier, however the higher cost generally reflects the higher risk involved with the work activities being undertaken.
Is Public Liability Insurance Worth It?
Without a doubt, public liability insurance is one of the most important types of cover that any business can have.
Because public liability premiums are calculated based on your perceived risk, the insurance is generally affordable for everyone. For example a sole trader working as a cleaner may think they don’t need insurance, however the cost will be so small that it’s almost crazy not to take out cover.
To get a quote on your public liability and find out how easy it is to protect yourself and your business, simply click on the link below and complete our easy online insurance quote request.