Public liability insurance (PLI) covers claims arising from injury or property damage suffered by a member of the public on your premises or other locations where you work. Most United States businesses can get the same coverage in their commercial general liability policy. The cost of public liability insurance averages $400 per year for small businesses.
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What Is Public Liability Insurance?
PLI is a form of insurance specifically designed to protect business owners against claims coming from members of the public. PLI covers your business from liability you may incur while working with the public at events, open stores or where your products are commonly used in public.
It’s important to note that most business owners opt to purchase commercial general liability insurance (CGL) instead of public liability insurance because CGL offers the same coverage plus more for only slightly higher premiums. In fact, PLI policies are most commonly written in the United Kingdom and Australia and are difficult to find in the United States.
What Public Liability Insurance Covers
PLI covers third-party bodily injury and property damage suffered by members of the public while on your premises or other locations where you work. PLI also covers related legal costs and compensation claims. For example, if a client slips and falls over a piece of equipment at your place of doing business, PLI may cover their medical bills and legal expenses.
Here is what PLI covers:
- Bodily injury: Customers or other members of the public slipping, falling, and getting injured on your property or in your workspace is your biggest risk as a business owner; the third-party bodily injury coverage of the PLI protects against this risk
- Property damage: This covers damage you do to a third party’s property while performing your work; if you’re a painter and a ladder falls on your customer’s car, for example, PLI would help cover the cost of repair
- Legal expenses: If a third party sues you as a result of injury or property damage, PLI would help cover the associated legal costs, up to the limits of your policy
Businesses that work directly with the public are the most susceptible to these third-party liability risk exposures and these businesses are the only ones that need PLI. However, every business needs CGL insurance. If you’re not sure which coverage type is best for you, be sure to speak with an insurance agent or broker.
What Business Public Liability Insurance Doesn’t Cover
It’s important to note that most business owners elect to purchase a CGL policy instead of PLI because CGL offers the same protection and more for just a small increase in cost. Business owners should also be aware of policy exclusions in any type of insurance but PLI is a prime example of where this awareness is especially important.
There are many risk exposures not covered in a PLI policy, according to Mark Charnet, president and founder of American Prosperity Group:
“Limitations on public liability insurance are somewhat extreme. PLI only covers the liability of a customer’s injury while on the business property. This means that any injury suffered by a third party on the property and the legal fees associated with the injury are covered by the insurance company. However, PLI does not cover businesses against employee, investor or vendor claims. Additional insurance needs to be purchased to cover these types of claims.”
Here are the primary PLI exclusions you need to know:
- Personal and advertising injury: Personal injuries include libel and slander, and an example of advertising injury would be a false statement you made about a competitor in an advertisement that prompted them to sue you for damage; this coverage is included in a general liability policy
- Employee injuries: PLI insurance does not cover illness or injuries to employees while they are on the job; for this coverage, you’ll need worker’s compensation insurance instead
- Errors and omissions: PLI will not cover your professional errors, such as a mistake made while doing business; for this coverage, you’ll need professional liability insurance, which is also called errors and omissions insurance
Public Liability Insurance Cost
PLI costs vary based upon several factors but most small business owners can expect to pay about $400 per year in premiums outside the United States. This is comparable to what many businesses will pay in the U.S. for CGL insurance. Insurance providers will evaluate the cost factors and associated risks to determine what premiums you will pay for liability coverage.
Some of the factors that impact PLI cost are:
- Size of your business
- Deductible amount
- Risks associated with your business or industry
The biggest factor affecting the cost of PLI is industry type. For example, the construction industry can expect to pay premiums that are higher than average because they typically work with heavy machinery and their work sites are in public locations. The retail industry may also pay above-average premiums because heavier foot traffic increases the chance for third-party injuries like slips and falls.
Tips on Applying for Business Public Liability Insurance
While applying for insurance is relatively the same across various businesses and industry types, there are subtle differences about applying for public liability insurance that you’ll need to know prior to beginning the application process.
Here’s what you need to know when applying for public liability insurance:
1. Confirm Public Liability Insurance Is All You Need
It’s important to pay attention to exclusions, which are risks that are not covered by your policy. For example, PLI covers third-party bodily injury and property damage. But PLI does not cover personal damage, such as libel, slander, advertising injury or first- and second-party damage whereas CGL does cover this.
Because CGL offers broader coverage than the PLI policy, many business owners opt for the CGL policy. For this reason, awareness of the PLI exclusions will be the step you take prior to applying for coverage.
2. Prepare the Required Public Liability Insurance Information
While most public liability applications are fairly straightforward for business insurance, you are wise to have some documents and general information about your business available for reference.
Applicants often need the following information when they apply for PLI:
- Business name
- Business location
- Business contact information
- Number of employees
- Revenue estimates for the coming year
- Years of experience in your industry
- Details about potential risk exposures, such as handling dangerous chemicals
- Prior claims history
- Desired coverage amount (limits are usually $500,000 to $2 million)
- Coverage requirements for leases, contracts or certifications
The exact information required varies by provider but this list is a minimum that you’ll need to gather before you apply.
3. Ask About the Certificate of Liability Insurance (COI)
A certificate of liability insurance (COI) is a document that serves as evidence your business is covered by liability insurance. Many business owners, especially those working with the public, are required to provide COIs before they can win contracts for work projects or obtain licenses to work in a state or municipality. Any provider you use for PLI should be able to provide a COI quickly, easily and free of charge.
4. Apply with Your Chosen Provider
Now that you know what to expect while searching and applying for PLI, you can apply online easily at most insurance providers and get free quotes. Most businesses can get insured within 24 hours. Once you’ve received PLI quotes and compared at least three different providers, your chosen provider will work through the application process with you because it may vary by who you choose.
To compare quotes from multiple PLI providers at once, check out Insurance321. Their expert team will connect you help you find the right policy for your business. Get a free, no obligation quote today.
Other Types of Insurance You May Need
Your needs for small business insurance may extend beyond public liability coverage. For this reason, it’s important to know your primary risk exposures and how to adequately protect your small business with the various insurance types in addition to PLI. In fact, it’s possible that your business needs some other form of insurance, instead of public liability coverage.
Here are other types of insurance you may need in addition to or instead of PLI:
1. Commercial General Liability
CGL insurance covers third-party bodily injury, property damage and related legal costs, which is identical to PLI. However, CGL also covers other types of personal injury to third parties, such as defamation, libel, slander and advertising injury as well as first-party coverages (your expenses) like damage to property you are renting or actions of your employees.
Because CGL covers the same third-party liability risks as PLI, and it may cost as little as 10 percent more, CGL is often purchased as an alternative choice to PLI.
According to Tina Willis, owner, Tina Willis Law:
“If a business owner can’t afford the broader coverage of general liability insurance and doesn’t have many (or any) visitors from employees or vendors or other shareholders or much concern about things like libel or slander, then they would still get meaningful protection from a public liability insurance policy.”
2. Business Interruption Insurance
Business interruption insurance, also called business income insurance, covers losses of income resulting from a covered event that causes the business to cease normal operations temporarily.
For example, a covered event that could force a business owner to temporarily shut down their business would be a fire. Business interruption insurance would help replace the lost income while the office space or building is being repaired.
3. Commercial Property Insurance
Commercial property insurance protects against losses due to fire, theft, vandalism and extreme weather. Businesses that own a building and leaseholders not covered under the landlord’s policy should consider buying this coverage. This coverage also protects other assets of your business, such as equipment, furniture, supplies and inventory. Commercial property insurance is commonly included in a business owners policy (BOP).
For example, theft is the biggest threat for most small business owners. If your valuable assets were stolen, your business could experience a severe financial setback. It’s also important to note that personal insurance policies often don’t cover assets of a business. Therefore, home-based businesses may also need property insurance.
4. Commercial Auto Insurance
Commercial auto insurance is needed by business owners who use their vehicle for purposes of the business other than commuting to and from work. Although public liability insurance covers bodily injury and property damage to third parties while on your premises or in your workspace, it doesn’t cover injuries or damage due to auto accidents.
For example, if you have a business that requires work at multiple locations, such as contract work, and you get into an accident while traveling to your next work site, your public liability insurance policy will not cover injuries or property damage to third parties. You will need commercial auto insurance for this.
5. Workers Compensation
For business owners with employees, workers’ compensation is required coverage in most states. Workers’ comp insurance provides benefits to your employees in the event of work-related injuries or illnesses.
For example, if one of your employees tripped and fell at your work location and was injured, your workers’ compensation insurance would pay medical bills and wages from lost work time, if applicable.
6. Commercial Umbrella Insurance
Commercial umbrella insurance extends coverage on your liability insurance types, such as public liability. This coverage often increases the limits of coverage by $1 million and is typically purchased by business owners that are at risk of going over the limits on other policies.
A common occurrence when commercial umbrella insurance is used is in the event of an expensive lawsuit. For example, if you have a public liability insurance policy with a $1 million limit, and legal expenses from a lawsuit are $1.2 million, your umbrella insurance would cover the extra $200,000.
Who Public Liability Insurance Is Right For
Business owners wanting only third-party liability coverage protection, who don’t need the added coverage offered by a CGL insurance policy, may consider buying PLI. Since PLI averages at least 10 percent lower in premium cost than a CGL policy, it can be a significant cost savings for small business owners with those unique needs.
However, the cost savings may not be worth the risk, according to Matthew A. Struck, CPCU, ARM, MBA, partner at Treadstone Risk Management:
“General liability insurance typically includes public liability coverage. The public liability piece covers claims made by third parties against you or your business. A business owner may buy public liability insurance to save money vs. buying a general liability policy. However, I would highly recommend against that because the public liability policy will not cover claims made by employees, shareholders or vendors (first and second parties). The cost savings rarely is worth the added risk.”
The Bottom Line
Public liability insurance offers minimal third-party liability coverage for a cost that can be at least 10 percent lower than the popular commercial general liability policy. However, for broader coverage at a slightly higher cost, CGL is likely the better choice for the majority of small business owners.
If you’re thinking of buying a PLI policy in the U.S., it’s likely that you actually need CGL insurance. Whether it is PLI, or CGL insurance that you’re buying, Insurance321 has a team of experts who are there to help pair you with agents, brokers, and carriers to find the best policy. Get a free quote in as little as four minutes.