Public Liability Insurance: How It Works and What It Covers (2025)

Updated: September 10, 2025

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Key Takeaways

Public liability insurance covers your business when customers or members of the public get injured or their property gets damaged.

It covers slip-and-fall accidents and property damage but excludes employee injuries and professional negligence claims.

Your industry risk level, business size and contract requirements help determine how much public liability insurance coverage you need.

What is Public Liability Insurance?

Public liability insurance provides financial protection for your business's liability to other people for causing bodily injury or property damage. It's an older, more limited form of business liability insurance that only covers injuries to customers and property damage claims from the general public.

Today, most U.S. insurance companies no longer offer standalone public liability coverage. Instead, they sell general liability insurance, which includes all public liability protections plus broader coverage like advertising injury claims.

Insurance requirements and coverage availability vary by state and business type. Consult with a licensed insurance professional to determine appropriate coverage for your specific situation.

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What Does Public Liability Insurance Cover?

Public liability insurance protects your finances when customers or the public get injured or their property gets damaged because of your business. What your policy doesn't cover is just as important as what it does. The table below breaks down both scenarios:


Customer injury on your premises	✅	A patron slips on spilled water at your restaurant and breaks their wrist. Public liability insurance covers their medical bills, lost wages and compensation claims.
Employee workplace injury	❌	Your office assistant hurts their back lifting supplies at work. Employee injuries require workers' compensation insurance, which most states legally require.
Accidental property damage at a client's location	✅	An electrician accidentally drills through a client's water pipe while installing outlets, flooding their basement. The insurance handles water damage restoration and replacement costs.
Financial loss from professional advice	❌	An accountant makes a tax filing error, costing the client $15,000 in penalties. Professional negligence claims need professional liability insurance instead.
Third-party injury from your business activities	✅	Construction scaffolding collapses and injures a pedestrian walking by the job site. Coverage includes costs for medical expenses and legal defense.
Intentional damage or illegal acts	❌	A business owner gets angry and smashes their competitor's windows. Public liability won't cover this because the damage was deliberate, not accidental.
Visitor injury due to unsafe conditions	✅	A client trips over loose carpeting in your office lobby and fractures their ankle. The insurance covers emergency room visits, physical therapy and lawsuit expenses.
Vehicle accidents during business operations	❌	Your delivery van rear-ends another car while making client deliveries. Motor vehicle incidents require commercial auto insurance coverage.

How Much Public Liability Insurance Do I Need?

Public liability insurance isn't legally required for most businesses. But you need coverage for practical reasons like client contracts, business licenses or lease agreements.

Three factors determine your coverage needs:

1
Industry Risk
Some businesses face higher liability exposure than others. Construction and retail businesses need more coverage than office-based companies because construction and retail operations involve more customers and potential safety hazards daily.
2
Business Size and Requirements
Small businesses need both property and liability coverage, which is why many choose business owners' policies (BOPs) bundling these protections together. Carriers design BOPs specifically for smaller companies needing comprehensive coverage without complexity.
3
Legal and Contract Requirements
Many clients, landlords and contractors require proof of coverage before working with businesses. A certificate of insurance (proof of coverage document) becomes essential for securing contracts, renting commercial space or meeting vendor requirements.

Find coverage that fits your situation rather than choosing the cheapest option. Get quotes from several agents to compare options and review your coverage annually as your business changes.

Who Needs Public Liability Insurance?

Businesses that interact with customers, clients or the general public need public liability insurance. Coverage provides particular value for self-employed professionals and small business owners who cannot afford to pay legal costs and compensation claims out of pocket.

Business insurance requirements vary significantly by state and industry. Professional consultation is recommended to ensure compliance with local regulations.


You work at client locations	Consultants, contractors, freelancers, repair technicians	You're responsible for accidents or damage that occur while working on someone else's property.
Customers visit your premises	Retailers, restaurants, salons, fitness studios	Slip-and-fall accidents and other injuries on your property are your legal responsibility.
You provide hands-on services	Personal trainers, cleaners, health care providers, beauty services	Direct contact with clients increases your liability risk if someone gets injured during your service.
You operate in public spaces	Market vendors, food trucks, event organizers, mobile services	You're liable for accidents involving members of the public in spaces where you conduct business.
You run a home-based business with client visits	Consultants, tutors, therapists, small service providers	Your homeowner's insurance likely won't cover business-related accidents on your property.

Insurance for Public Liability: Bottom Line

Public liability insurance covers your business when customers get injured or when you damage their property during business activities. Public liability insurance handles common accidents like slip-and-falls but excludes employee injuries and professional mistakes. Consider your industry risk, business size and client requirements when choosing coverage levels.

Small Business Public Liability Insurance: FAQ

MoneyGeek's experts answered common questions about public liability insurance for small business owners:

Who does a liability insurance policy cover?

Public liability insurance covers your business from lawsuits by customers, clients, visitors and members of the general public who are injured or whose property you damage while running your business. Public liability insurance doesn't cover employees (who need workers' compensation) or damage to your own property.

How do I get public liability insurance?

Purchase public liability insurance through licensed insurance agents or brokers who compare quotes from multiple carriers. Many small businesses choose business owners' policies (BOPs) that bundle liability and property coverage for comprehensive protection at lower costs.

Do I legally need public liability insurance?

Public liability insurance isn't legally required for most businesses. However, businesses need coverage for practical reasons like client contracts, lease agreements or business licenses. Many clients and landlords require proof of coverage before working with businesses.

What's the process for filing a public liability claim?

File commercial insurance claims by contacting your insurance company immediately after incidents. Document the scene, gather witness information, take photos and avoid admitting fault. Your insurer will assign claims adjusters to investigate and handle legal defense when needed.

Do sole proprietors need public liability insurance?

Sole proprietors need public liability insurance, especially when working at client locations, having customers visit premises or providing hands-on services. Sole proprietors remain personally liable for business accidents and legal costs since no corporate structure protects personal assets.

How much does public liability insurance cost?

Public liability insurance costs vary by industry risk, business size and coverage limits. Higher-risk businesses like construction and retail pay more than office-based companies. Many small businesses find business owners' policies (BOPs) cost-effective because BOPs bundle liability and property coverage together.

How does public liability insurance compare to general liability insurance?

Public liability insurance is an older, limited form covering only customer injuries and property damage. General liability insurance includes all public liability protections plus broader coverage like advertising injury claims and personal injury lawsuits. Most U.S. insurers now sell general liability instead of standalone public liability policies.

About Mark Fitzpatrick

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.

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Public Liability Insurance