When starting a business, one of the most important steps to take is to obtain insurance. It doesn’t matter how successful your company is in those first few years, or how many loyal customers you acquire, if a claim is made against you, it could jeopardise everything you’ve built. 

Without proper insurance, even a single claim, such as a customer injury, property damage, or an employee lawsuit, can result in hefty legal fees, including medical expenses or settlement costs. According to a recent study, smaller businesses are especially vulnerable, with 40% of small businesses expected to face a liability claim in their first five years. 

Attaining insurance is necessary if you want to protect yourself against these risks, but it’s important to note that not all insurance types are the same. For instance, a lot of first-time business owners struggle to determine the difference between company liability insurance and public liability insurance. As a result, many choose just one company liability insurance, which offers broad coverage for internal business risks. 

This, however, is a mistake that could end up costing you. So, what is the difference between company liability insurance and public liability insurance? We’re going to look into the key characteristics of both insurance types below, explaining why you should be considering both.

Company liability insurance: explained

Company liability insurance refers to policies that protect your business from claims of negligence, accidents in the workplace, which have been rising specifically in the hospitality industry, or harm caused during your operations. This includes protection for claims made by employees, such as workplace injuries or illnesses, claims of negligence or errors in the services you provide and damage to business-owned properties or third-party properties. 

By encompassing these potential risks, company liability insurance ensures that your business is prepared to handle the financial and legal repercussions of both internal and external incidents. The scope is undoubtedly large, but that doesn’t mean it includes everything.

Public liability insurance: explained

Public liability insurance is a specific type of coverage designed to protect your business from external risks, such as incidents involving customers, vendors, or members of the public who interact with your business or premises. This includes protection if a customer or visitor is injured due to your operations, such as slipping and falling in your store, if an employee accidentally damages a client’s equipment while on-site, and if there are any legal fees, court expenses, and settlements related to third-party claims. 

By attaining public liability insurance, you’re ensuring that, when your business interacts with the public or operates in shared spaces, you have the protection necessary to deal with any claims that could be financially devastating. As mentioned before, a large number of small businesses have to deal with claims made against them early on in their lifespan, even companies that are careful and have carried out a lot of strategic planning to operate the business smoothly, so this is all about being prepared and proactive about incidents that you cannot plan for.

Why do you need both types of insurance?

The reason you need both insurances is that, as mentioned above, claims like this can be very hard to avoid. You can do everything in your power to make sure you’re operating in a safe workplace, but if a freak accident occurs and an employee is injured, you have to be prepared to go to court and potentially pay any medical expenses. Company liability insurance makes sure that your internal risks have coverage, while public liability insurance ensures external interactions, which often pose more unique risks, have the same amount of protection. 

Any gaps in coverage can be costly. Without company liability insurance, for instance, you’re vulnerable to risks like employee lawsuits or professional negligence claims, but without public liability insurance, you’re exposed to third-party claims. By securing both types, you eliminate these gaps and ensure that your business is fully protected, no matter where or how risks arise. So you can continue to operate without the stress of a single unfortunate event bringing your company down.