Liability Insurance is a general term that covers multiple insurance coverages that help people protect themselves and their businesses from potentially high legal costs and any damages awarded by the courts.
As a leading insurance broking firm, we are often asked to explain what liability insurance covers? Who needs liability cover? And what does liability cover provide to people or businesses that buy this insurance? To answer these questions and help you understand, we’ve outlined the specifics of liability insurance and how it is beneficial for business owners to invest in it.
What is Liability Insurance?
As a broad insurance cover, liability insurance is essentially insurance that works to protect you and your business if someone is injured or their property is damaged, and they hold you responsible. Examples include injury at your premises, something that you do that causes an injury, goods you sell or repair or property conditions (i.e. slippery floors or an uneven path) that cause someone to get injured or worse. Damage to other people’s property or injury to contractors on site can all be covered under liability insurance.
Operating a business is demanding, requiring both time and knowing how to run and safeguard your business. Without liability insurance, your businesses growth and success could be at risk, so it’s important to transfer that financial risk by buying liability insurance. It’s easier to budget for an annual insurance cost than to try and find a large sum of money quickly to pay for lawyers to defend you and pay any court award.
What Are The Types of Liability Insurance?
To ensure you choose the right type of liability insurance, it’s essential to know the main types and what they protect you from. Liability insurance with Insurance Advisernet can be separated into two main covers:
- Public liability
- Product liability
Who takes out liability insurance? Generally, any of the two insurance types are taken out by business owners for their everyday operations. This can be a pool cleaner, retailer, builder or transport company. Basically, every business needs some level of liability insurance. Anyone that deals with the public, sells, maintains, repairs or imports goods and equipment should also have liability insurance.
Both public liability insurance and product liability insurance are usually included as a part of the package of covers for home and contents, boat, motor vehicle, aircraft etc. In general, liability insurances cover two main risks: the legal cost of defending you and your businesses from a liability claim and paying for any court-awarded compensation if the company is responsible for the injury or damage. In addition, the policy will pay the other person’s legal costs.
What is Public Liability?
Public liability is an insurance type that covers people, businesses, events and contractors for legal defence costs against legal action taken against you or the company, whether it’s a genuine claim or a try on from a disgruntled customer. This insurance will also pay any damages if found responsible for causing a person's injury or death, damage to their property, and any resulting financial loss. While Public liability cover can be mandatory in some states, it’s mostly optional and a decision for the business owner. Investing in public liability cover is essential if you want to provide yourself with peace of mind and financial protection against potential liability claims.
Although all precautions may have been taken to prevent injuries in the business, accidents happen. Without public liability insurance, you will have to take the risk of paying expensive legal costs, as well as any court-awarded damages. If you’re wondering which industries are the most at risk and need public liability, all businesses and industries have risks and therefore need some level of insurance.
It's important to note that some industries that operate in public areas or have lots of people in one place have higher risks than others. This means they will usually have a higher premium than a retail store. If you currently have public liability insurance, we encourage you to check what you are insured for and the level of cover. Your local Insurance Advisernet adviser is a professional who will help you to review your insurance cover.
What is Product Liability?
If you and your business make, import, sell, distribute, or repair products, you can be legally liable for injury, property damage, and resulting financial loss due to faults in the product, advice in use, or sometimes customer misuse.
You are unlikely to depend on the original manufacturer, importer or retailer to protect you and pay for your legal costs. So, taking out product liability insurance as protection against potentially paying expensive legal defence costs and any damages awarded by a court is a good idea. Product liability also extends to cover your business against claims by people giving the item, say as a Christmas present. Although they didn’t buy the item from your business, your insurance will still protect you if they are injured or the property is damaged.
Under Australian law, you may be held responsible if your goods, services or products don’t comply with Australian Standards or breach the requirements of the Australian Consumer Law (ACL). Under the ACL, your business is the first point of call for any injury or damage caused by any goods or product that you import, export, distribute, manufacture, assemble, install, grow, produce, alter, repair, bottle or label. As a manufacturer or importer, having your own product liability insurance is essential, as the overseas manufacturer may not be liable under the law in that country, leaving you to pay legal defence costs and any damages awarded. Regardless of whether the allegations are true or not, it’s important to have insurance to transfer the financial risk to an insurance company.
If you currently have product liability insurance, we encourage you to check what you are insured for and the level of cover and what goods and products are listed as insured and that your business operations are correctly insured. Your local Insurance Advisernet adviser is a professional who will help you to review your insurance cover.
Get The Right Liability Coverage with Insurance Advisernet
If you are a business owner, import, manufacture, sell or distribute products, investing in public or product liability insurance is an easy way to manage this financial risk and protect your assets.
If you’re interested in getting the right advice about public or product liability insurance to protect you and your business, Insurance Advisernet is here to assist. Our authorised representatives are professional advisers, able to work with you to look at your risks and answer all your questions about liability insurance. To know which liability insurance would best suit you and your business, as well as appropriate sums insured or special sub-limits, contact us today for a tailored consultation.
This communication, including any weblinks or attachments, is for information purposes only. It is not a recommendation or opinion; your personal or individual objectives, financial situation, or needs have not been taken into account. This communication is not intended to constitute personal advice.
We strongly recommend that you consider the suitability of this information in respect of your own personal objectives, financial situation and needs before acting on it. This document is also not a Product Disclosure Statement (PDS) or a policy wording, nor is it a summary of a particular product’s features or terms of any insurance product. If you are interested in discussing this information or acquiring an insurance product, you should contact your insurance adviser to obtain and carefully consider any relevant PDS or policy wording before deciding whether to purchase any insurance product.