Public liability insurance provides cover if your business damages someone's property, or causes injury or death
It can cover the legal expenses of defending a claim, along with any compensation you end up having to pay.
Do you need public liability insurance?
Public liability insurance isn't compulsory, but you may well want it if your business has visitors. For example, a customer visiting your shop, restaurant or office might have an accident and sue you.
Equally, tradesman and other businesses that do work on other premises or in public may want insurance. For example, faulty work or accidents might cause damage to a client's property, or a member of the public might be injured on your building site.
Some customers will insist that you have public liability insurance in case of problems, and some trade associations require their members to have this insurance. Insurance may also be a condition of getting a licence - for example, as a skip operator, or to put tables and chairs on the pavement outside your restaurant.
What public liability insurance covers
Public liability insurance doesn't cover every compensation claim you could face. Unless it's bought as part of a package with other insurances, you usually won't be covered for:
- harm to your employees - you must have employers' liability insurance
- accidents involving your vehicles - you must have vehicle insurance
- harm caused by products you make or sell, or use as part of your service - you may want product liability insurance
- professional advice and services - you may want professional indemnity insurance.
Any insurance policy will also have other exclusions. For example, you're very unlikely to be covered for harm relating to asbestos. Other risks, such as working at height, may only be covered if you let the insurer know when you apply for cover.
You should make sure that the policy covers all your employees, including any temporary workers. If you use subcontractors, you should check with the insurer. The policy may cover subcontractors who are just providing labour, but other subcontractors may need to have their own public liability insurance.
You also need to be aware of the conditions you need to comply with. For example, failing to comply with health and safety regulations may invalidate your insurance. In any case, you have a legal responsibility for the health and safety of anyone affected by your business.
The cost of public liability insurance
The cost of insurance will depend on how much cover you require. Compensation claims can be large, so cover of £1-2 million is common. Some customers may require you to have cover of £5 million or more.
Premiums will also be affected by your type of business and how it could affect the public. Particularly risky activities, such as working with dangerous materials, will push costs up. The size of your business, including turnover and number of employees, will also have an impact.
If you have a poor prior claims record, premiums will be higher. If enforcement action has been taken against you for breaches of health and safety regulations, you may find it difficult and expensive to get insurance at all.
You should make sure you have a health and safety policy, have carried out a risk assessment and your employees are properly trained. This will help you meet your legal obligations and reduce the risk of incidents.