What is public liability insurance UK
Public liability insurance is a type of business insurance that is critical for businesses that often deal in person with members of the public, such as customers or clients. It’s one of the most popular policies in small business insurance packages and helps with both legal fees and compensation payments if something goes wrong.
The best insurance package for many businesses will include public liability insurance, meaning there is protection should a business be sued for bodily injury or property damage. It can pay for the cost of legal advice when defending a suit, as well as any compensation and medical bills.
But what does public liability insurance cover? And who needs it?
Public liability insurance: what does it cover?
Public liability insurance covers if a third party, such as customers or clients, becomes injured or their property is accidentally damaged because of a business’s work. If this happens, they could blame and sue the business, which can be very expensive to defend.
Public liability insurance in the UK is often wrapped up with product liability insurance too. This would cover injury or damage related to products a business manufactures, designs, or sells. However, product liability isn’t always included, so make sure to check before you buy if you need that coverage as well.
Small businesses and freelancers also need coverage; in particular, they might not have the resources to fight a legal claim, let alone pay any fees and compensation either. Even small suits and compensation claims can put a business at risk.
For example, a client visits a business’s office space, trips over some work equipment and injures themselves. Or an employee of a cleaning business breaks an expensive item when cleaning a clients’ home. If the business is sued, the underwriter would pay the costs to defend these claims.
Importantly, as this is third-party cover, it will only cover costs related to damage or injury of that third party. For example, property damage to your premises or injury to a business’s employees would not be covered. To protect employees, a business must take out employers’ liability insurance.
Who needs public liability insurance?
All types of small businesses could benefit from public liability as well as product liability insurance. It can be relevant to sole traders, partnerships, limited companies or registered charities.
If a business involves anything to do with the public, then it’s an essential policy to have. It’s likely worth it if:
- A business is home-based and clients visit the home office
- A business has business premises, like an office which clients visit regularly
- A business premise is open to the general public, such as a shop
- Work involves going to meet a third party
- The business hosts events or conferences
- The business sells at market stalls or stands open to the public
A business could also benefit from product liability insurance if involved in the supply chain of a product, from the design and manufacture to its distribution, supply and retail. This could be designing and manufacturing homeware, or even just reselling imported products.
While it’s not a legal requirement, a business could face other scenarios where it is needed. Some clients, venues or trade organisations may require it. For instance, a venue may require a caterer to have public liability insurance in place before working with them.
What level of public liability insurance do I need?
When deciding what level of public liability insurance to take out, think about the level of risk you face as well as the size of any possible compensation claims. This can help you gain a rough figure for how much cover you need to buy.
Public liability insurance is normally taken out at £1 million, £2 million and £5 million levels of cover. However, a business may be able to buy less or more depending on how much coverage is needed.
A construction firm is likely to face a higher risk than most businesses. Building sites are dangerous places, and a visiting client could be injured or property could be damaged. Here, it may be a good idea to aim for high levels of cover.
But a lower-risk business, like a small tutoring company, can probably assume the threat is much lower and could therefore aim for lower levels of cover. While there is no right or wrong level of cover, it’s up to a business to decide how much coverage is required.
The average cost of public liability insurance for small businesses in the UK is around £120 per year, according to insurance specialist NimbleFins. But, this can depend. An underwriter may also take into account the business’ line of work, number of employees, claims history and more when providing a quote. Shop around for the most comprehensive and best value cover before buying a policy.