The amount of public liability cover you need depends on the kind of business you do and what kind of coverage your clients are expecting. Further, while deciding the cover, you should think about the scale of work you do along with the possible compensation amount that you would have to pay in case something misfortune happens. Here, it is important to note; compensation amount could be high as it could consider medical expenses and lost income as well.
In many cases, the amount of public liability cover that you require is also mentioned in the policy contract. If you are working on a government contract, you would require having a minimum amount of public liability cover as stated in the contract.
So, while deciding the cover in a public liability insurance policy, it is necessary to consider the following points=
- You are buying public liability insurance to get coverage for your legal liability against third-party
- Public liability insurance is necessary to get coverage for personal or property damage.
In any case, you can decide the right cover under public liability insurance as per the circumstances.
To help you in deciding what cover you should take in a public liability insurance, we have given some of the factors which you can consider=
- Contractual Obligations= If the work is on a contractual basis, carefully check the insurance clauses to determine the minimum level of cover which you required. While it is necessary to comply with this amount, it doesn’t showcase the full assessment of your risk. Therefore, don’t depend on this factor only, but certainly, consider it.
- Coverage for any one occurrence= It means, your sum insured should be sufficient enough to help you cover the third-party claims which may arise against you.
- Level of compensation awarded= There is no dearth of such instances where the compensation amount awarded to injured parties has increased. Therefore, your cover in public liability insurance should be wide enough to cover the compensation to the third-party.
Further, sum insured remains fixed throughout the policy tenure, but the same can’t be said about the compensation. It means, if an accident happens today, your public liability cover is the amount that you have today with you. However, any serious personal injury case can take up months or years to settle. If the accident happens today when your sum insured is fixed, but the verdict comes after ten years in which the court asks you to pay high compensation, you would have little help from your public liability insurance policy. Therefore, while, choosing the cover, make sure that your sum insured is enough to cover the future compensation amount as well.
Also, as per your business requirements, you can increase the sum insured available in your public liability insurance policy by paying the extra premium.
In any case, the public liability cover should be extensive enough to offer you coverage against third-party losses or damages. In case the amount of liability is more than your sum insured, you would have to pay the balance amount.
As J.K Furniture was into the furniture business, the company bought a public liability insurance to get coverage in case of third-party loss or damage. While buying the cover, the company considered its nature of work. As the company involved in manufacturing or constructing, there were high risks of loss or damages, and therefore, it planned to opt for a wide coverage.
The company decided to opt for an extensive coverage, to avoid the situation of underinsurance. It means, the company did not want to face a situation where it had to pay a part of the claim from its pocket due to the insufficiency of cover available under public liability insurance. The company opted for a sum insured cover as per the future requirements as well.
Many times, the company works on a contractual basis as well, and therefore, for contractual business contracts, the company usually purchases a separate public liability cover as per the limit defined in the business contract.