Public liability insurance explained: What is it and who needs it?

Once you decide to run a business, there’s plenty of paperwork to stay on top of. But between financial documentation and contracts to consider, you will also need to safeguard your company’s future by taking out insurance. You’ve probably already heard of public liability cover, one of the most common types of business insurance, but complex industry jargon means it’s not always clear what this coverage provides. Here, we explain everything there is to know about public liability so you can work out whether you need it.

What does public liability insurance cover?

Also known as general liability insurance in the USA, public liability insurance covers you if a customer or third party is injured, or their property is damaged due to your business activities.

If they decide to make a claim against your company, the costs of compensation and legal fees will be covered by this insurance. You can typically claim between £1 million and £10 million depending on your policy, but companies working in some sectors may be required to take out a minimum amount of cover.

As this focuses on incidents involving the public, you cannot rely on public liability for employee injuries or property damage. To cover the cost of any claims made by members of your own team, you need to take out employer’s liability insurance as well. Furthermore, public liability is futile if you are the one who suffers an injury or sustains any property damage, though business contents and income protection insurance can protect you in these instances. Many providers will allow you to add all the additional covers you require to your public liability policy.

What professions require public liability cover?

Though it’s often assumed that this insurance is only required by businesses working in dangerous industries, it can actually be hugely beneficial to any company that ever deals directly with members of the public. For example, public liability would cover you if you went to a customer’s house and accidentally spilt coffee over their expensive computer. Alternatively, if a customer came to your place of work and injured themselves after tripping over an uneven floorboard, public liability insurance would protect you if they decided to make a claim. Accidents always happen and often come from unexpected situations, so whether you’re a tradesman, a cleaner or a caterer, it always pays to be safe and have cover in place in case the worst ever happens.

Is public liability a legal requirement?

Public liability insurance is not a legal requirement, but that certainly doesn’t mean your business should overlook it. For instance, consider the fact that average personal injury settlements can cost between around £1,500 and a huge £350,000. Without public liability insurance, this compensation would have to come directly out of your business’s funds, which would likely have a devastating impact on its future. You also have a duty to protect your customers and other members of the public, so it’s wise to consider this cover as an essential company expense.

Is proof of public liability required?

Some professional bodies and trade associations may ask for evidence of your policy as part of your membership terms, while you may also need to provide proof of cover while working in certain public places, such as markets and building sites. You will always be sent a bundle of paperwork outlining the details of your policy and providing confirmation that you are indeed covered. However, it’s far more practical to obtain a public liability insurance certificate in addition to this standard documentation. This certificate is a condensed version of your policy, making it far easier to produce to anyone requesting proof of insurance.

How much public liability cover do I need?

The level of public liability required for your business depends on a number of factors. Firstly, you should contact potential clients to see whether a minimum amount of public liability is necessary before you begin a job. For example, governments or local authorities will usually request £5-£10 million. It’s also up to you to ascertain how risky your everyday business activities are—if you work with dangerous tools or equipment, accidents could have very serious consequences, so a high level of cover would be sensible.

How much does public liability insurance cost?

Insurance providers rarely offer fixed sums when setting public liability prices. After all, every business is different, and the cost of your policy will depend on how risky you appear to insurance underwriters, and how large potential claims could cost them. Factors that determine the cost include your claims history, the nature of your work, and the level of cover you’ve requested. Most providers will offer you a free, online quote, so you can gauge a rough idea of the expense in no time.