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Public Liability

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What is a public liability insurance policy?

Public Liability Definition

Public liability insurance provides coverage to businesses in the event that they are held legally responsible for injury or damage to third parties due to their business activities. In simple terms, it helps protect businesses from financial loss when things go wrong and it's their fault.

Why do businesses need public liability insurance?

Protection from Financial Setbacks

Accidents can happen, and they can be costly. This insurance provides financial support to cover potential claims or legal fees.

Building Trust

Clients and customers feel more comfortable dealing with a business that's insured. It shows that the business is prepared and professional.

Legal Requirement

In some industries and for certain contracts in New Zealand, having public liability insurance is a legal obligation.

What does public liability insurance typically cover?

Public liability insurance primarily covers legal costs and compensation claims made against your business if a third party (this could be a client, customer, or member of the public) is injured or their property is damaged due to your business activities. For example:

  • If someone slips on a wet floor at your premises and injures themselves.
  • If you accidentally damage a client’s property while at their home or place of business.
  • If a product you sell or produce causes harm to a user.

It’s important to note that the exact cover can vary based on the policy and the provider.

How does public liability insurance work?

Once a business has public liability insurance, if a claim is made against the company due to an incident that falls within the scope of the policy, the insurance will cover the compensation payments as well as any legal fees. This means:

  1. The injured party will lodge a claim.
  2. The insurance company will assess the validity of the claim.
  3. If the claim is valid, the insurance company will cover the compensation and legal costs up to the policy limit.

What are the advantages and disadvantages of public liability insurance?

When deciding on Public Liability it’s essential to weigh the pros and cons:

  • Financial Security: Protects businesses from potentially crippling financial claims.
  • Reputation Management: Demonstrates responsibility and professionalism to clients and customers.
  • Peace of Mind: Owners and operators can focus on running their business, knowing they’re protected from unforeseen events.
  • Cost: Premiums can be an additional expense, especially for small businesses.
  • Policy Limitations: Some policies might have exclusions or might not cover all potential scenarios.
  • Possible Complacency: Having insurance might make some businesses less vigilant about safety or risk prevention.

Are there common misunderstandings about public liability?

It’s the same as other insurances:

Public liability is different from professional indemnity or business insurance. Each serves a different purpose.

It’s only for big businesses:

Businesses of all sizes can be at risk of public liability claims.

All activities are covered:

Not necessarily. Some high-risk activities might be excluded from standard policies.

Why is public liability insurance important? 

Public liability insurance is more than just another business expense; it’s a pivotal tool in safeguarding the continuity and reputation of a business. For certain industries or areas within New Zealand, it’s not just beneficial but legally mandated to have this insurance in place. But beyond legal obligations, this insurance acts as a protective barrier, ensuring that unexpected liability claims, which can often reach staggering amounts, don’t lead to a business’s financial downfall. Furthermore, in the interconnected world of business, many partners, clients, and stakeholders view having liability insurance as a testament to a company’s responsibility and professionalism. It’s often seen as a prerequisite for forming valuable B2B relationships and securing contracts. In essence, public liability insurance is a testament to a business’s preparedness and commitment to the well-being of those it interacts with.

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