Public Liability Insurance in Portugal: Quick Guide

As the owner of a small business, you're legally responsible for everything that happens with it. This includes the good stuff (such as getting compliments on your latest sales report), but also the bad stuff (such as finding out one of your clients accidentally broke her arm while shopping at your store).

Because good business management is about being ready for the good and the bad, it's time for us to sit down and have a serious conversation about public liability insurance.

Sometimes referred to as commercial liability insurance and often confused with general liability insurance, public liability insurance is so essential for your small business that—in some cases—the Portuguese Government even declared it to be mandatory!

But do you know what public liability insurance covers? How much does it cost? Or what it is exactly? If the answer to any of these questions is "No," please allow us to make things clearer for you...

What is Public Liability Insurance (Seguro de Responsabilidade Civil)?

Public Liability Insurance provides coverage for businesses against claims arising from injuries or property damage to third parties due to business operations. It caters to legal fees, settlements, and any related expenses for incidents occurring on business premises or as a result of business activities.

For instance, if someone slips and falls on your property or if your business activities cause damage to someone else's property, public liability insurance can cover the legal and medical expenses associated with both incidents.

This type of business insurance is particularly important for companies that interact with the public, work on client sites, or have a physical presence where accidents or damage could occur. The coverage amount and specifics vary depending on the policy and the nature of the business.

In Portugal, public liability insurance is designated Seguro de Responsabilidade Civil. While public and general liability insurance coverage is optional in most cases, Portuguese businesses operating in dangerous sectors are legally required to have a Seguro de Responsabilidade Civil.

What Does Public Liability Insurance Cover?

In a nutshell, public liability insurance covers claims of personal injury, death, and damages. It can also be used to cover legal defense costs associated with personal injury claims.

Normally, public liability insurance coverage includes:

• Damages for pain and suffering (such as bodily injury).

• Medical expenses, including travel costs.

• Business property damage (everything from damage to a building to a broken laptop).

• Present and future loss of earnings.

• Associated legal costs.

Does My Small Business Needs General Liability Insurance Coverage?

Several factors may influence small business owners to acquire general liability insurance, but it's hard to think of one reason why they shouldn't. Basic protection is virtually compulsory for any business with a job site. Additionally, it also helps business owners forget about potential medical costs and attorney fees and focus on what matters most: Running a company!

If your business interacts with the public – whether you have a physical location that customers visit or you operate at client locations – then general liability insurance is also needed! It's pretty much indispensable for retail stores, restaurants, contractors, or delivery personnel, regardless of how small (or big) they are.

Moreover, the ASF guidelines in Portugal require business owners to purchase insurance in case they work in specific business sectors. For example: Public liability coverage is mandatory for anyone operating in the natural gas services sector in Portugal.

Benefits of Public Liability Insurance

These are the main advantages of public liability insurance:

• Financial protection: Liability coverage shields against potential hefty court costs, medical treatment, third-party claims, third-party injuries, employee injuries, bodily injuries, and damage to a customer's property (among others).

• Business reputation: Demonstrating foresight by having this public liability insurance showcases your dedication to safeguarding both your business and the public. In other words, having a strict business insurance policy means that you mean business!

• Peace of mind: Perhaps the biggest pro of liability insurance coverage for businesses. After all, if a business owner's policy doesn't protect against potential game-changing accidents, how is she supposed to focus on running a company?

On the other hand, there is one downside to business liability insurance: it does cost money! However, how much you pay for business insurance depends greatly on your company's general liability insurance policy. 

Try to find the perfect policy for you by establishing clear coverage limits and avoiding overpaying for coverage you don't need.

How to Obtain Public Liability Insurance in Portugal

1. Risk Assessment: Identify the potential risks associated with your specific business type and interactions with the public.

2. Seek Expert Guidance: Engage with seasoned insurance brokers or agents knowledgeable about Portuguese norms.

3. Compare Policies: Acquire quotes from diverse insurers to secure optimal coverage at an attractive rate.

4. Regular Reviews: Continuously assess your policy to ensure its alignment with your business's evolving nature and potential risks.

Types of Business Liability Insurance

These are the most significant types of business insurance in Portugal:

General Liability Insurance

The term general liability insurance is often used to refer to the type of public liability insurance we have discussed so far in this article. However, there's a difference in what public and general liability insurance cover.

A general liability insurance policy covers claims on a larger scale, as it includes accidents that happen outside of the business property. In the end, though, the difference between public and general liability insurance is simply a matter of scope.

Professional Liability Insurance

It differs from general liability insurance because it protects professionals from their own mistakes, professional negligence, or inadequate work.

Employer Liability Insurance

Employer's liability insurance, often referred to as workers' compensation insurance, is a type of business liability insurance that provides coverage to employers for costs related to work-related injuries, illnesses, or deaths of employees.

In a nutshell, employer liability insurance is designed to protect businesses from potential lawsuits by employees seeking compensation for bodily harm sustained while performing their job duties.

Other Types of Business Insurance

They're perhaps not as significant, but also worth noting:

• Commercial property insurance: Protects against any damages against business property.

• Commercial auto insurance: Commercial auto insurance is similar to regular auto insurance but for vehicles owned by a company.

• Data breach insurance: For financing expenses related to a data breach, such as attorney fees and even PR services.

Please keep in mind that some of the risks listed above may already be covered by your general liability insurance policy.

Summary

Public liability insurance in Portugal is an essential safeguard for businesses, protecting them from the financial consequences of being held legally responsible for injury or damage to third parties or their property. This type of insurance, commonly referred to as public liability cover, offers a buffer against potential compensation claims that may arise during the ordinary course of business operations. It's particularly vital for companies that interact frequently with the public, such as retail stores, restaurants, and event organizers.

In addition to public liability insurance, businesses in Portugal should also consider employers liability insurance. This policy is crucial as it covers claims made by employees who may suffer injuries or illnesses as a result of their work. It complements public liability cover by ensuring that all bases are covered—from public and customer incidents to employee-related issues.

Another important facet of liability insurance is professional indemnity insurance. This coverage is key for professionals who provide advice or services, such as consultants, architects, and engineers. It protects against claims of negligence or breach of duty arising from an oversight or error that results in a financial loss for a client. This insurance is an important layer of protection that addresses more specific professional risks.

Regarding fiscal responsibilities, public liability insurance tax in Portugal should also be considered when assessing the overall cost of insurance. This tax is applicable to the premium paid for the liability insurance and affects the total cost to the policyholder. Understanding this tax component is crucial for businesses to budget appropriately for their insurance needs.

Legal expenses can also be a significant concern for businesses facing liability claims. Many public liability insurance policies offer an option to include coverage for legal costs associated with defending a claim. This can be a lifeline for businesses, as legal proceedings can be costly and complex.

In summary, public liability insurance in Portugal is a critical component of a business's risk management strategy. It works hand-in-hand with employers liability insurance and professional indemnity insurance to provide a comprehensive safety net. Businesses must consider all aspects, including public liability insurance tax and potential legal expenses, to ensure they are fully protected against the various risks they face.

Frequently Asked Questions (FAQ)

Is public liability insurance mandatory for businesses in Portugal?

While not universally obligatory, public liability insurance in Portugal is mandatory for some businesses with high public interaction.

What is included in my general liability insurance coverage?

Your liability coverage protects against bodily injury claims, deaths, property damage, damage to another person's property, and legal defense costs. Contrary to public liability insurance, general liability insurance can protect your business operations in third-party locations.

How does Public Liability Insurance differ from Professional Liability Insurance?

Professional and public liability insurance cover similar things (lawyer and medical expenses, injury claims, and so forth) but in a different manner. While public liability insurance protects people and property from your business, professional liability insurance protects people and property from your activity as a professional. In the case of a doctor, it can be physical harm caused to a patient; in the case of a marketing agent, it can be an advertising injury.

How much does general liability insurance cost?

It depends on your liability coverage, but the cost of general liability insurance for small business owners usually sits at €500-€1,000 annually.

How much does public liability insurance cost?

It's hard to pinpoint exactly how much public liability insurance cost, but you can get insurance quotes from well-known agencies such as AXA for as little as €5 monthly (if you're running a small business).

What kind of business needs general liability insurance?

In most cases, you will be just fine with public liability insurance, but general liability insurance can be crucial for businesses that perform services in other people's houses (for example). The business owners' policy should reflect the needs of their specific business.