Insurance World

With the compensation culture increasing around the world, having public liability insurance is becoming more and more important. If you don’t have public liability insurance included in your current building insurance, then now is the time to look at getting better cover. Here is some advice about why you need public liability insurance, and what to look out for:

What is public liability insurance?

Public liability insurance is an insurance policy that protects you from claims that other people might make against you in the event of an accident. If someone damages their property or injures themselves in or around your property or business then public liability insurance will cover you for any compensation claims that might occur. Cover usually ranges from Ј250,000 up to Ј1 million.

What are you covered against?

Public liability insurance will insure you against accidents or loss that others might suffer in or around your home or business premises. You are covered against claims from trespassers, as well as injury that might occur to anyone from falling objects or people carrying out repairs. If an accident occurs on your property and someone claims against you, your insurance will help you pay any compensation.

Included in your contents insurance

Some contents or property insurance policies have in-built public liability insurance. You should check with your insurer whether this is the case, and what level of cover you have. Even if the insurance is included, you need to make sure that you are adequately covered for any accidents that might occur.

Premiums

The premiums that you pay depend on the level of coverage you want. If you are simply covered your home, then premiums are likely to be lower than if you are covering a business. However, premiums are relatively cheap for the level of cover that you are afforded, and it is therefore essential for anyone running a business. With compensation claims on the rise it is also a good idea for homeowners to have adequate public liability insurance.

Dangers of not having insurance

If you don’t have public liability insurance then you could end up with a massive compensation bill. If you are at fault or negligent and someone makes a claim against you, then you will have to pay the full level of compensation if uninsured. A claim might range from a few hundred pounds to a few million for more serious accidents. If you cannot pay the claim amount then you could lose your home and other possessions in order to pay for the claim.

Requirements

Some businesses are required to have public liability insurance, such as horse riding schools. Any type of business that has some obvious risk to the public will be required to have public liability insurance. Also, many businesses and customers will want proof that you have public liability insurance before they work with you, in case anything should happen and a claim is made.

The Financial Services Authority (FSA) has been looking into the issue of Payment Protection Insurance (PPI) and the way that it is sold to people taking out loans in the UK. The list includes many of the UK’s biggest banks and building societies, and it is single-handedly earning lenders over Ј1 billion a year.

The point of PPI is that if a loan borrower becomes unemployed or unable to work though accident or illness, the loan provider will cover their payments until they return to work. The borrower pays a monthly premium for this insurance, something that around 50% agree to when taking out the loan.

However, some interesting information has come to light, as the Department of Trade and Industry has found that only 4% ever make a claim, and only 75% of those claims meet the terms of the insurance. The lenders themselves are in many ways responsible for this, as the FSA found that around 50% of the lenders surveyed failed to explain the details and exclusions to borrowers before persuading them to sign up. The investigation also found that although lenders were not telling the customers that the insurance was compulsory, they were often adding the PPI to the quotation without clearly displaying that the insurance was optional.

The FSA also found that some lenders were not informing borrowers that the cost of the insurance to cover the full loan term was being added as a lump sum at the beginning instead of as a monthly payment spread out over the loan term. The result was that borrowers would not be able to cancel the insurance without paying the loan off in full and taking out a new loan.

The investigations also uncovered more bad practice: price. Simon Burgess, Managing Director of British Insurance Ltd, has pointed out that one of the major high street banks levies a charge of Ј30 per Ј100 of loan insured onto borrowers. Simon added that if borrowers looked onto the Internet, they would find rates of Ј4 - Ј6 per Ј100 of loan insured. Price comparison service uSwitch has supported his findings, which effectively means that banks are charging nearly 500% more than their Internet rivals.

Here’s an example for you: in 2005 a high street bank quoted Ј5,150 for PPI, against a loan of Ј16,000. The total value of the loan was therefore Ј21,150, and the borrower would have to pay interest on the whole amount. The monthly repayments amounted to Ј300, and Ј70 of that would be PPI. A few minutes on the Internet and you would easily find equivalent insurance for approximately Ј20 per month (Ј50 a month less) and the insurance could be cancelled at any time, without a problem.

Here’s what we advise:

When you get a quote, ask for it with and without PPI – that way you can see the true cost of the insurance and compare it directly.

Check that the PPI is not added to the loan at the outset, to be paid as a lump sum. Don’t touch these loans with a bargepole!

Never accept the lender’s PPI without checking out the competition first. Just type “Payment Protection Insurance” or “Income Protection Insurance” into an Internet search engine and you’ll be able to get a number of quotes quickly and easily.

Read the insurance small print. There will be a long list of exclusions which will stop you from making a claim. For example, if you are a seasonal or temporary worker, you will probably be excluded. Some policies say that you must be in the same job for six months before you can make a claim. Most policies make it very clear that you must be in good health and know of no reason why you could, in future, be unable to work. There are many more exclusions on the lost, and if any of these apply to you then there is no point paying for PPI.

We say: PPI is a waste of money as far as many people are concerned. If it does suit you then find the cheapest deal and make sure you can cancel the insurance at any time without penalty – you may change your mind or your circumstances could change. Also, it’s essential that you read the small print because you may just find that you won’t be able to make a claim anyway.