If you are unfamiliar with the term, you may be wondering what the term liability coverage actually means.
In a nutshell, it’s a special type of business insurance with the means to encompass all of the holder’s accountabilities, as well as incidents. Of course, all in the bounds of what the policy itself includes. If you are a business owner, there are basically two choices that you can make. You can either go for General Liability Insurance (GLI) or Public Liability Insurance (PLI). The fact is simple – both of them have their own pros and cons, and it is up to you to decide which one is a more suitable solution for your business efforts.
In this article, we are going to discuss what both of these insurance types are, as well as the major differences between them that you should take into consideration.
Public Liability Insurance
Public Liability Insurance (abbreviated as PLI) exists with the means to protect a business owner and their assets from any losses that they may suffer due to damage, injury, losing property, and any other similar event that happens because of a third party/member of the public while they are within the boundaries of the company grounds. It could be a customer, a visitor, a person handling a delivery, and so on.
Most businesses consider PLI as the first course of action. This is particularly related to retail companies, or any other kind of business whose operations largely depend on public access. One could say that it is a kind of minimum insurance coverage for a business.
General Liability Insurance
On the other hand, General Liability Insurance (abbreviated as GLI) takes into consideration a wide variety of legal problems that a business may run into. This type of policy includes the kind of coverage that a PLI policy is all about. However, its main focus is on securing all liabilities that stem from faulty products, negligence, accidents that happen in the workspace, and injuries that are caused either by a member of the company’s staff or the public.
Medical and legal expenses are often included. States and communities often require a GLI policy in order to provide a business with a license to work.
There are various factors that you should consider when making the choice which kind of liability insurance your business really needs. Both of them come with their own set of pros and cons.
First of all, we have already ascertained that there is a significant difference in terms of coverage. General Liability Insurance encompasses pretty much everything. This includes various disastrous events such as all kinds of injuries, IP infringement, product issues, and so on. Basically, it is more comprehensive than its counterpart. Still, as it is a complicated matter, it requires assistance from public liability lawyers.
Public Liability Insurance only deals with the liability of a customer getting injured while on your business premises. Still, this is probably the most important type of coverage since it can make – or break – the sustainability of a business. The reason why many small business’s opt for this option brings us to the next factor, which is the price.
The fact is that General Liability Insurance most often costs a lot more than its counterpart. This is, of course, due to the fact that it encompasses pretty much everything that relates to your business operations. So, it is a comprehensive but expensive solution. Sometimes it is more than your business really needs and can afford, particularly if you are running a small or medium-sized business. Therefore, such business most often pick the latter, as it costs them a lot less on a monthly basis and makes them safe enough for their current needs.
Finally, both of these kinds of insurances have their own limitations. General Liability Insurance doesn’t encompass professional liability and worker’s compensation. And, of course, as we have previously established, the high price is also a limitation due to the fact that the majority of small businesses cannot afford it. On the other hand, Public Liability Insurance doesn’t protect your company from the worker, vendor, or investor claims. This means that you have to eventually purchase other kinds of insurances in order to deal with such issues.
Basically, it is up to you to decide which kind of liability insurance is suitable for your situation. GLI is more comprehensive but also more expensive, and if you are running a small business, the chances are high that you cannot even afford it.
For many small businesses, PLI can be enough, but there are situations when they may have to purchase other forms of insurance due to investor, employee, or vendor claims.
If you are running a larger, better-financed business, you should have no trouble purchasing GLI, but you should keep in mind that it doesn’t cover worker’s compensation and professional liability.
About the Author
Daniel Brown is a law graduate and a passionate blogger from Sydney. His areas of interest are alternative dispute resolution and its applicability in different fields of law, IP law and resolution of disputes arising from intellectual property infringement and commerce law.