What Is Public Liability Insurance?

Definition & Examples of Public Liability Insurance

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Public liability insurance is a type of business insurance that covers the cost of claims made by the public that happen in connection with your business activities.

Learn more about what public liability insurance covers, whether you need it, and alternatives.

What Is Public Liability Insurance?

Public liability helps cover the costs for personal injuries, loss or damage to property, and death. Public liability only covers incidents on your business property, so if there's an incident anywhere else, you won't be covered. 

How Does Public Liability Insurance Work?

Many businesses come in contact with the general public and interacting with them comes with risks. A customer could slip and fall on a wet floor, even if you put up warning signs, and you could wind up with a lawsuit on your hands.

If someone files a lawsuit against your business for a reason covered by your policy, you file a claim with your insurance company. Your insurance company helps cover your legal costs and pay damages up to the limits of your policy.

What Does Public Liability Insurance Cover?

Public liability insurance coverage includes the following:

  • Bodily injury: Public liability insurance helps to cover expenses if someone is injured.
  • Property damage: It helps to cover damage to a third party's property. Let's say you own a convenience store, and one of your employees accidentally spills a coffee on a customer's designer purse. Your policy could help cover the cost of replacing the purse and any damaged contents.
  • Legal expenses: It also covers the cost of hiring and paying an attorney to represent your business in a lawsuit brought by a customer or someone else is covered by the policy.

Keep in mind that this coverage only applies to your business property. If you or your employees interact with clients elsewhere, like in their homes, public liability coverage may not provide enough coverage.

Work-related injuries to your employees are not covered by liability insurance. Those fall under workers' compensation insurance.

Do I Need Public Liability Insurance?

Whether you need public liability insurance depends on where your business is located and its specific needs. It's a more limited policy than other types of business insurance, which means it's more affordable, but it doesn't provide as much coverage.

Federal law requires all businesses with employees to have workers' compensation, disability, and unemployment insurance. Liability insurance isn't required, but most businesses should have some type of liability insurance. Given the limitations of public liability insurance, business owners may want to purchase an alternative.

Alternatives to Public Liability Insurance

General liability insurance covers everything public liability insurance does. It also covers personal and advertising injury. Advertising injury occurs when a business is sued for false or misleading advertising. Since general liability insurance is more comprehensive and more readily available, it's a better insurance choice for most businesses. This coverage is relatively rare in the US, and it's the equivalent of general liability in the UK.

Businesses may also want to consider product liability insurance and professional liability insurance. Product liability coverage protects your business if there's a claim due to a defective product, while professional liability insurance protects you if there's a claim of financial loss due to professional errors or negligence. Malpractice insurance is a form of professional liability insurance.

Key Takeaways

  • Public liability insurance covers the cost of claims made by the public that happen in connection with your business. 
  • It helps to cover the costs for personal injuries, loss or damage to property, and death. 
  • Businesses typically choose general liability insurance rather than public liability insurance since it's more comprehensive. They may also want to purchase other types of liability insurance like product or professional liability coverage.

Article Sources

  1. Fit Small Business. "Public Liability Insurance: Cost, Coverage, and Quotes." Accessed July 10, 2020.

  2. ABI. "Public Liability Insurance." Accessed July 10, 2020.

  3. Hiscox. "Public and Products Liability Insurance." Accessed July 10, 2020.

  4. SBA. "Get Business Insurance." Accessed July 10, 2020.

  5. DC Department of Insurance, Securities, and Banking. "Introduction to Liability Insurance." Accessed July 10, 2020.