Why You Need Liability Insurance
Liability insurance protects businesses from claims due to actions or negligence that leads to accidental damage, financial or physical to a third party. Whether you’re a small business or a mega-corporation, having some kind of liability insurance is a no-brainer.Obviously, avoiding unintentional damage or harm to people or property is a high priority, but regardless of how careful you are, there will always be day-to-day risks involved.If a claim is made against you or your business, the financial repercussions can be severe. Liability insurance can greatly assist with the costs that are associated with dealing with liability claims. These include personal injury compensation, property damage and legal expenses.There are two main types of liability cover you need to consider when looking to cover your business, public liability insurance and product liability insurance.What’s the difference between the two?
Public liability insurance
Public liability insurance covers you and your business from financial loss through legal action if it’s found that you’ve been negligent in your business activities. There’s a multitude of ways that public liability claims can be initiated depending on the nature of the business at fault and other external factors.Slips and falls are perhaps the most common type of public liability claim due to most businesses operating from a physical site. If a client comes to your place of business and slips on a liquid spill or trips over a misplaced object, you could be liable for injury or damages.Public liability can also extend to damage done to neighbouring properties. If a business has faulty electrical wiring that results in a fire that burns down an adjacent building or obstructs access to it, that business would be accountable under public liability laws.For the most part, public liability insurance is optional, however, some states make it mandatory for certain businesses and events to be covered for public liability.Considering the variety of ways your business could be staring down the barrel of a public liability claim, there is never a good reason for your business to not have a public liability insurance policy in place.
Product liability insurance is protection against claims of damage or harm that are caused by the products and services a business provides. If you supply, sell, or deliver goods and services, product liability insurance goes a long way in protecting you from any inadvertent injury or damage that those goods and services may cause to a third party.An example of a product liability claim could be in the automotive industry. If a car is sold with a faulty transmission, defective electrical components, or flawed safety features such as airbags and brakes that result in an accident, the car manufacturer would more than likely be on the receiving end of an expensive product liability claim. Car manufacturers know the significant costs that product liability claims can incur, often resulting in global recalls of their vehicles to avoid considerable liability payouts.Pharmaceutical companies are also good examples of where product liability cases can cost millions of dollars in compensation and legal fees for medical products that cause severe side effects or death.Regardless of the product or service provided, product liability insurance is an essential safeguard for any business offering goods and services.
Do I Need Both?
The short answer is yes.The key factor to remember, is that public or product liability insurance policies are applied from the date of the incident’s occurrence. This means if an incident occurs during the production or service period, or while the third party is on your premises, then public liability would be applicable. However, if the incident occurs after the product or service has been delivered, then it is a completely different affair.For the most part, neither policy will fully cover you for every scenario as they are specific in their purpose. So, making sure you have both types of protection will ensure you will be covered throughout the entire business process.
There’s also a grey area
Depending on the nature of your business, there can sometimes be a crossover of these policies which further supports the need for both.For example, let’s say a water filtration company contracts a plumber to install a water filtration system in a factory which ends up leaking and as a result a third party is injured by a fall. The cause might be the plumber’s workmanship, the factory’s negligence or it might be a defective filtration system provided by the water filtration company. Depending on the circumstances and what the investigation reveals, could decide who is liable and under which policy it is covered under.Whatever the outcome of the investigation, this is a perfect example of why it’s important to be covered under both risk categories, and how having both types of cover can complement each other in any unfortunate situation.
What’s the easiest and most cost-effective way to insure my business?
When you’re looking to protect your business, there is no one size fits all insurance product as every business is unique and operated differently. But when it comes to choosing whether you need public liability or product liability insurance, it’s not often that you’ll only need one and not the other. In the rare case that you do, this will be called standalone public liability insurance. Whatever the case, it is strongly recommended you always have both.Most insurance companies will usually offer both public and product liability insurance as a package, this is commonly known as a ‘broadform liability’ insurance policy.A broadform insurance policy is the best way to protect your company from expensive legal costs and potential financial ruin caused by unfortunate accidents in and outside your place of business.To get the most out of your liability insurance, connect with one of our insurance brokers in Perth for a tailored approach to all your business insurance needs.