Table of Contents
- Public liability insurance meaning
- Do I need public liability insurance?
- What public liability insurance covers
- Does public liability insurance cover employees?
- What is not covered by public liability insurance?
- How much does public liability insurance cost?
- How much public liability insurance should I get?
- What happens if I don’t have public liability insurance?
- What happens when someone makes a public liability claim?
- What types of business insurance do I need?
- Public liability insurance – Frequently asked questions
Public liability insurance covers businesses against compensation claims made by members of the public. Most businesses involve some contact with the public – that could be clients, customers, visitors, or simply someone walking past your workplace. Even the safest of business activities, meanwhile, can carry with it a risk to a third party. Combine the two, and you have a potentially costly situation on your hands.
Public liability insurance is designed to protect against such an outcome. Read on below to find out what public liability insurance is, what it covers, what it costs and what happens if you don’t have it.
Public liability insurance meaning
Public liability insurance is one of the most common policies found under the banner of business insurance, and is applicable to an array of different sectors and professions.
It provides financial protection if you injure a third party or they die, or their property is lost or damaged as a result of your regular business activities, and that third party (or their beneficiaries), then makes a claim against your business.
Do I need public liability insurance?
Public liability insurance is not a legal requirement, but there still might be circumstances in which getting it is a necessity. For example, you could find that clients will not hire you if you don’t have this type of business insurance.
You may also need to have public liability insurance to gain membership of certain industry associations or to be recognised by certain professional bodies.
Aside from this, there is just the simple fact that, without public liability insurance, an accident suffered by a member of the public could spell doom for your business. You might particularly want to consider this type of business insurance if:
- members of the public visit your business premises
- you interact with customers and clients at events
- you work in properties owned by third parties
- you otherwise work close proximity to other people’s personal property
What public liability insurance covers
As mentioned, public liability insurance is intended for claims made against your businesses relating to:
- an injury to a third party caused by your business activities
- damage to the property of a third party caused by your business activities
If a client, customer or member of the public were to make a claim against you, your public liability insurance could cover any legal fees and compensation costs, should the claim be successful, as long as you have the right level of protection.
For example, if you are a mobile hairdresser and drop a hot curling iron on your client’s carpet, public liability insurance could cover the compensation costs.
Similarly, if you are a builder or a gardener, and someone walking by your work site trips over your materials and breaks their arm, your public liability policy could help with any compensation costs and legal fees.
It can even be of use in seemingly more benign settings. Offices still have hot cups of tea ready to scald a visitor’s lap, while your stall and materials at a local craft fair provide plenty of trip hazards for anyone curious about your wares.
» MORE: What does public liability insurance for events cover?
Does public liability insurance cover employees?
No. While public liability insurance will cover situations where a third party, such as a customer or visitor, is injured or has their property damaged, it does not stretch to your employees.
To make sure you can adequately compensate your employees if they fall ill or are injured during the course of their work for your business, you will need employers’ liability insurance.
In fact, it is a legal requirement that you take out an employers’ liability insurance policy worth at least £5 million from an authorised insurer if you have any UK-based employees that are not family members.
» MORE: Employers’ liability explained
What is not covered by public liability insurance?
Alongside your employees, public liability insurance won’t cover anything that happens to you, your business premise, your tools and equipment, or your stock. Essentially, if it doesn’t happen to a third party or their property, it isn’t captured by public liability insurance.
It also won’t be of use if a client makes a claim against you in relation to your advice or services, or accuses you of professional negligence. For that, you would need professional indemnity insurance.
» MORE: The cost of professional indemnity insurance
How much does public liability insurance cost?
The price of public liability insurance depends on the nature of your business and the type of risk it faces, as well as factors such as your claims history. It follows that the riskier the insurer sees your business activities, the higher your premium might be.
For some businesses, public liability insurance may only cost a few pounds a month, but it can depend on how you interact with the public and the sector you’re in.
This variation means that typical public liability insurance costs can vary between £50 to £450 per year. However, this could save you millions of pounds depending on your cover limit.
As well as your premium, you may have to pay an excess if you make a claim. This is the amount that you pay for each claim before your insurer covers the rest. You agree to an excess amount when you take out your policy.
What can affect the price of public liability insurance?
The cost of your public liability insurance cover could vary based on details such as:
- the nature of your business
- the size of your business
- your annual turnover
- the level of cover you choose
- how many people (if any) you employ
- where your business is located
- whether you have made any previous claims
- the excess you agree to pay towards any claim
- your business’s health and safety record
How much public liability insurance should I get?
Your cover limit is the most your insurer would pay out if you made a claim, so it needs to be right for your specific business risks. Common claim limits range from £1 million to £10 million, though it can vary by provider.
If you work in a high-risk profession, you may want to consider a higher level of public liability insurance. For example, if you are an electrician, builder or cleaner who works with dangerous tools or chemicals that could cause severe injury or damage.
Clients may ask that you have a certain level of cover before agreeing to work with you. For example, government contracts usually ask you to have insurance worth at least £5 million.
It’s important to get the right level of cover, as you will be responsible for making up any shortfall not covered by your policy if a claim amount is higher than your cover limit. If you’re not sure how much cover you need, or if your business has special requirements, it may be worth speaking to a business insurance broker.
What happens if I don’t have public liability insurance?
Unless your regulatory body or professional organisation requires you to take out a policy as a condition of its membership, or a client insists you have it before they agree to work with you, you won’t get into any trouble for not having public liability insurance.
However, you are leaving yourself exposed to paying 100% of a successful claim made against your business if something were to go wrong. You may regret not taking out a policy if you end up saddled with thousands of pounds in legal fees and compensation costs.
» COMPARE: Business insurance with NerdWallet
What happens when someone makes a public liability claim?
If somebody suffers an injury at your place of business, they may lodge a public liability claim against your business.
First, they might hire a solicitor, who will likely contact you with a formal letter. This letter should outline the details of any accident, injury, property damage or similar that was suffered by the claimant.
If you have public liability insurance, contact your insurer immediately and they will inform you of whether the incident is covered by your policy. From this point onwards, if this incident is covered, your insurer should take the reins.
The insurer will ask the claimant and their solicitor to fill in the paperwork required to make a formal claim, as well as invite them to submit supporting evidence like receipts, photographs, medical information and more. You and your business may also submit evidence.
At this point, your insurer will decide whether the claim should be accepted or rejected.
If accepted, the insurer and solicitor will negotiate to reach a settlement that all parties agree upon. If no agreement can be reached, the matter may be decided in court.
If declined, the claimant may accept the outcome or take the matter to court. Either way, once the matter is dealt with you will be given an overview once the claim is closed.
It’s worth noting that your insurer will source a solicitor on your behalf and will usually cover court fees, legal fees, damages and compensation payments due as a result of any public liability claim. If you don’t have public liability insurance, you would need to cover these costs and deal with each step of the process yourself.
What types of business insurance do I need?
While public liability insurance is important, it’s likely not to be the only type of business insurance you need. Depending on the type of business you operate, you may also want to consider these types of insurance policies:
- Product liability insurance: This type of policy covers your business against claims of personal injury caused by a product designed, distributed or made by your business.
- Employers’ liability insurance: Every business owner with employees is legally required to have this type of business insurance. It helps businesses to pay compensation if employees are injured or made unwell by their work.
- Professional indemnity insurance: This type of business insurance will protect you against claims made by clients who say they have received damaging or poor advice or services.
- Cyber insurance: This protects businesses against hacking and cybercrime.
- Commercial property insurance: Covers the cost of repairs and replacement of premises, stock and equipment.
» MORE: Public liability insurance for events and what it covers
Public liability insurance – Frequently asked questions
Yes, public liability insurance costs are tax deductible as they are defined as an allowable expense by HMRC.
Just as with other types of small business, sole traders and the self employed can get public liability insurance.
The key difference between these is that public liability covers injuries, death and property damage suffered by members of the public, while professional indemnity covers financial damage suffered by clients due to negligence or bad advice.
Public liability insurance covers your business against claims made by members of the public for injury, death or property damage due to your business and its practices.
It does not cover your business in the case of injuries to employees, loss or damage to your own property, cyber incidents or issues arising from professional advice. Some providers may also not cover claims relating to toxic and hazardous materials, such as asbestos.
While there is no legal requirement to get public liability insurance for a party, it might still be a good idea. It might be required as part of hiring a venue, but, if not, it will still protect you against claims in the case of accidents, injuries and property damage that can easily happen.
You can even get insurance for a single day if you would not otherwise need this form of business insurance.
Image source: Getty Images
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