Know Risk is a community education program designed by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) to improve our understanding of insurance and how it relates to managing the many risks we all face in life.
Liability insurance for business
What should you be covered for?
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You may think you’re well covered, but your business may be underinsured or even uninsured if something goes wrong. If so, recovery could be very difficult. Being aware of your unique liabilities from a business perspective as well as understanding the types of insurance products available to you, allows you to better manage your risks and minimise your liabilities.
On a basic level, a liability refers to your responsibility to others. Liability insurance will protect you and your business against claims arising from injuries or damages to other people or property that result from some aspect of your business. Basically if someone makes a legal claim against you, you will be financially protected and the insurance will cover the associated costs rather than you having to find the cash to cover it yourself.
Types of liability insurance that you might consider as a business owner include public liability, product liability and professional indemnity insurance.
Liability arises out of a duty of care to the public and this type of insurance is particularly relevant for businesses that have customers or clients visiting their premises, as the business has a responsibility for the safety of anyone on their premises.
Public liability insurance covers you in the case of death or personal injury to a third party, loss or damage to property, or financial loss if you or your business are found to be negligent.
If a claim is lodged against you or your business, public liability insurance will cover any costs and expenses associated with the claim, as well as any damages awarded to the third party.
There is a level of safety that consumers are entitled to expect under Australia’s consumer laws and claims against products may arise when these standards are not met.
As a business, you are liable for any product you manufacture, distribute, supply or sell. This means that if for some reason the product is unsafe, harmful, defective or dangerous and causes injury, death or damage, you may be held liable.
Product liability insurance will provide you with cover if any of these things happen to another person or business as a result of your product’s failure.
As a professional, you are expected to meet high standards of skill in your area of expertise. If a client suffers a loss – whether it is financial, physical or material - as a result of your advice, or your failure to uphold professional standards, you may be at risk of a breach of duty.
Professional indemnity cover protects you against claims of negligence made by clients and can cover professionals across a range of industries. A professional indemnity policy will cover the costs and expenses of defending a legal claim as well as any damages that are awarded.
While traditionally, ‘professions’ were limited to a few well-known occupations, such as doctors, lawyers and financial advisers, the definition has now changed to include any person who offers service advice in a specialised field. For some professions, Professional Indemnity is mandatory, for others, optional.