What is public liability insurance?

With insurance, you need to decide what it is you want to protect yourself from. There are many forms of cover to choose from in your personal life, such as travel, health, mobile, and car insurance. When you own a business, there are a variety of other options to choose from, too. One of the main ones to consider is public liability insurance. But what is public liability insurance? 

If a customer or member of the public makes a claim against you for injury or property damage, public liability insurance covers the compensation and legal costs. 

If you don’t have a customer-facing business, you might think you don’t need this insurance. However, read on; even if you work from home, it might still be wise to take out cover for public liability insurance.

To help you better understand what this kind of insurance is, in this article, we will explain:

• What does public liability insurance cover?
• Do you need public liability insurance?
• What happens if you don’t have public liability insurance?
• How much public liability insurance do you need?
• What is proof of public liability insurance?

Public liability insurance covers (though may not be limited to) the following:

• It only offers you protection against claims made by third parties. It protects you if your business is brought to court by a client, customer or member of the public.

• If your business is sued, public liability insurance will cover your legal defence costs, plus any compensation or settlement money you have to pay out.

• If someone is injured while on your business premises or as a result of your business activities.

• If the NHS claims the medical treatment costs when dealing with someone who was injured as a result of your business activities.

• It covers the cost of legal action and compensation claims made against your company if a third party is injured or their property suffers damage while at your business premises.
• It will also offer you protection when you are working in their home, office, or business property.

It’s important to know what public liability insurance doesn’t cover. For example, you aren’t protected if your employee sues you —  employers’ liability insurance offers cover for this, which is a legal requirement for businesses who employ more than one person.

It also doesn’t cover damage to you, your employees, or damage to the property. This would be covered by business insurance.

Ask yourself two questions:

• Does your business interact with the public?
• Does your business provide a service or undertake a trade?

Although you’re not legally obliged to take out public liability insurance, if the answer to either question above is yes then it’s seriously worth considering. It will provide you with important cover if someone sues your company, which might otherwise bankrupt your business.

Even if you work from home, you might still need public liability insurance. For example, if a delivery person were to come into your home and injure themselves, they could claim against you. 

In some circumstances, your client might insist that you have public liability insurance before they hire you. For example, if you’re a tradesman contracted onto a job.

There are no legal requirements to have public liability insurance. However, if you don’t have it and a claim is made against you, you’ll have to pay your legal costs, such as the price of hiring a solicitor. 

There’s then the outcome of the claim brought against you to consider. If the case against you is successful, you could be forced to pay the claimant’s legal fees and a hefty settlement figure. You’ll have to carefully consider whether this is a risk you can afford to take when deciding if you should take out public liability insurance or not.

The amount of insurance cover you take will depend on your business. If your company has a low amount of public interaction (for example, you work from home), then the cover you need should be less. However, if your business is public-facing such as a café, hairdressers, or restaurant, you could need a greater amount of protection.

Cover usually starts at £1 million but goes all the way up to £10 million and above. The more cover you need, the more expensive your premiums will be. It’s worth doing some research to find out the standard cover costs for your industry. 

From time to time, you might need to prove you have public liability cover. For example, if you’re working at an event, a fair, or a building site, your client might want to see you have appropriate cover for the work you’re carrying out. The easiest way to show them is by providing them with your schedule of insurance. 

You should now know a little bit more about public liability insurance and the vital role it could play in protecting your business. If you’re unsure about any other terms check out our resources page, where you’ll find lots of helpful information.  

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