What is Public and Product Liability Insurance?

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These types of business insurances are used to provide business protection to companies and cover very different liability areas arising from incidents or injury claims. Depending on the company’s nature, you may need to have one or both types of insurance to provide the necessary finance for legal proceedings and compensation that may be awarded in the event of a claim.

Both insurances typically cover costs such as legal fees and settlements arising from claims, but neither will offer any protection for you or your employees. Each policy will legally and financially guard your company against claims that are brought from a third party.

What’s the difference between public and product liability insurance?

Public liability insures against accidents that result in third party injury or damage; on the other hand, public liability insures against injury or damages caused by a product your business designs, makes, repairs or sells.

For events associated with running a company, it is important to determine which type of insurance will be required for your business. For those that operate business premises like a cafe, or provide services in other people’s homes, public liability insurance is advisable.

Suppose your business involves the manufacture or sale of goods. In that case, product insurance will protect against design faults, defects, or insufficient warnings that result in damage or injury to your customer or another third party.

Public liability insurance cover

If your business interacts with the public, then it is wise to have public liability cover to offset the risk of being exposed to expensive personal injury claims. It may come as a surprise to learn that there is no legal requirement for a business to carry public liability insurance. Businesses are not legally bound to obtain protection, but clients, landlords or partners frequently request it.

That said, some trade bodies require their members to hold a minimum level of cover. For instance, the Association of Plumbing & Heating Contractors Limited requires members to hold at least £2M of public liability at all times.

Public Liability Insurance is calculated against the risks connected with your business. If it is determined that the risk factor is high, then insurance premiums will rise accordingly.

Risk factors that can cause premiums to increase include things like:

  • Previous claims or a poor safety record.
  • Premises that have high public traffic, like retail outlets.
  • Operating risks such as dangerous machinery or fast-moving vehicles.
  • The size of the business and the number of employees.
  • Income levels, higher turnover equates to higher risk.

Ensuring safe operating procedures and having good safety regulations can help keep Public Liability Insurance payments down. The opposite is also true, having a track record of previous claims or indications of unsafe operating processes can drive premiums up.

Product liability insurance cover

Like Public Liability, there is no legal requirement for a business to obtain Product Liability Insurance. However, if you are involved in the production, manufacture, or sale of goods, then there is a risk that your business can be the target of a claim at some point. Whether it is due to manufacturing defects or unclear warning labels, you can be held liable for any injuries that occur from the use of the product.

Suppose you are on the receiving end of a lawsuit claiming damage or injury caused by your product. In that case, having product liability insurance will protect you from having to pay hefty settlements or compensation.

It is also worth noting that should you produce any product, even one that is given away for free, you can still be subjected to accident or injury claims. The same is true if you did not make the product but are selling it, your company is still responsible. If you sold it, repaired it, or imported it under your name, any claims will be directed to you.

Product Liability Insurance covers things like:

  • Product defects or faults that were undetected by a quality control
  • Damage or loss to property caused by a product defect
  • Injury to a person caused by a faulty or defective product

Examples

For clarification, here are a few scenarios that could trigger a claim against your company that would fall under either Product or Public Liability.

Public Liability Insurance Claims:

  • A customer slips and falls in your shop, sustaining an injury to her ankle.
  • Installation of a new sink at a customer’s home floods the kitchen and damages their property.
  • A restaurant server drops hot coffee on a customer causing burns.

Product Liability Claims

  • A small electrical appliance has faulty wiring causing injury from electric shock.
  • A face cream product has incorrect application instructions and results in an eye infection.
  • A lawnmower malfunctions and causes damage to the garden and fence.

For both types of insurance, is it wise to seek adequate coverage for your business to ensure that you are protected against any possible claims and financial liability?

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