As a small business owner or independent contractor, you’re exposing your business to numerous risks every day as you’re trying to establish yourself in the market.
From potential lawsuits for neglect to financial losses due to costly legal action, the road to success can be filled with obstacles.
But that’s if you don’t have adequate insurance coverage.
The right insurance policy can offer you and your business protection against various risks.
But with so many options available, what kind of insurance policy do you need?
Well, some of the most common types of insurance for small businesses are professional indemnity and public liability insurance. Both these policies can be highly beneficial to your business and ensure you can grow your operations without worrying about claims and legal action.
So, in this article, we’ll review what each cover means and highlight the main differences between professional indemnity and public liability insurance.
What is Public Liability Insurance?
Public liability insurance is a type of insurance designed to provide businesses with coverage against third-party claims for bodily injury or property damage resulting from the business’s operations. In other words, public liability insurance will protect your business if a client, supplier, or member of the public suffers an injury or property damage as a result of your business operations.
More specifically, public liability insurance covers your business for any financial costs associated with compensating the individual making the claim if you’re found liable and all legal-related expenses.
Here are two examples of public liability insurance claims that could be made against your business:
Slip, trip, and fall accident
This is quite common. In fact, according to Safe Work Australia, there were over 30,000 slip, trip, and fall accidents in Australia in 2022!
But how does it happen?
Let’s assume you run a beauty salon. One of your customers comes in. It’s raining outside, and the floor of your salon is wet. However, there’s no warning sign.
Unfortunately, the customer slips on the wet floor and falls. This results in a broken arm.
The customer decides to sue you for their injuries and for compensation for medical expenses.
If you hold public liability insurance, you will be covered for the cost of defending yourself during the lawsuit and any compensation awarded to the customer if you’re found liable.
Property damage
Property damage is another common claim.
Let’s say that you run a gardening business. You send one of your contractors to a client’s home. As they walk through the house to access the garden, they knock a very expensive vase off of a table in the hallway. The vase falls on the floor and breaks into pieces.
The owner decides to sue your contractor for the damages. If you hold public liability insurance, your policy will cover the costs incurred by the lawsuit as well as compensation costs.
Now, there’s something important you should know about public liability insurance. It only covers third-party claims. In other words, it only covers claims made by individuals or organisations outside your business. Claims made against you by an employee or business partner won’t be covered.
Professional Indemnity Insurance
Professional indemnity insurance (also referred to as Errors and Omissions Insurance) covers companies against claims for third-party financial loss resulting from errors, omissions, or negligence in the professional services provided by the company.
This type of insurance is essential for businesses providing professional services, including accountants, consultants, or legal professionals.
To help you better understand the difference between professional indemnity and public liability insurance, here are two examples of professional indemnity insurance claims that could be made against your business:
Error in advice
Let’s assume that you run an accounting company. You advised one of your clients regarding their bookkeeping, which has led to a significant financial loss for them. They decide to sue you, seeking compensation for their loss.
If you hold a professional indemnity insurance policy, you’ll be covered for the legal and compensation costs associated with the claim. If you don’t and you’re found liable, you’ll have to pay for these expenses.
Negligent design
Now, let’s use another common example. In this scenario, you’re an architect. You recently landed a big client looking to build a new shopping center. You completed the work and designed the building as per requirements. Unfortunately, your plans weren’t accurate, and the defects have caused damage to the building. A year later, your client decided to sue you for the cost of repairs and any expenses related to the construction delay.
If you hold professional indemnity insurance, your policy will cover the legal and compensation costs associated with the claim.
Here again, there’s something you should know about professional indemnity insurance. It only covers claims related to the professional services provided by your company. This means that it doesn’t cover claims related to other products you might offer that are not related to your professional services.
Where do public liability and indemnity insurance cross over?
Most of the time, public liability and indemnity insurance don’t cross over, as many public liability insurance policies exclude professional services and vice versa. However, not all insurance policies are created equal, and it’s best to discuss these specifics with your insurer. Also, make sure to read your policy carefully and review the fine print.
What we can tell you, though, is that these two insurance policies can complement each other and provide you and your business with comprehensive protection.
For instance, let’s say that you run an accounting business where clients can walk in to talk to one of your employees and ask for advice. They could very well be given the wrong advice, resulting in a financial loss while tripping on something left on the floor and breaking their arm!
Sure, this would be bad luck, but it can happen.
That’s why, depending on the nature of your business, you might want to purchase both professional indemnity and public liability insurance to cover your company against the various risks associated with your operations.
Looking for the best public liability and indemnity insurance for your business?
You’ve worked hard to get to where you are.
That’s why adequate insurance coverage is so important.
At upcover, we know how exposed small business owners are to litigation risks. That’s why we partner with market-leading insurers that offer a comprehensive range of insurance policies designed with small business owners, independent contractors, and startups in mind.
Not only do we partner with the best insurers to ensure your business, assets, and reputation are protected if a claim is raised against you, but our team of experts is also always available to assist with any concerns or questions you might have.
How do you get started? Jump on our instant quote generator to receive quotes instantly and get insured within minutes.
Alternatively, don’t hesitate to get in touch. We’d love to help!
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