When operating a business, there are times you will be interacting with members of the public. These could be clients, customers, or simply passersby whilst your business is functioning. During your business operations – regardless of how careful you are in taking preventive measures – accidents happen, and if your business is taken to court and faced with a lawsuit, you could be left with a hefty bill.
Public liability insurance is an insurance product that will cover your business if you are sued by a customer, a client, or any other member of the public for injury and damages to them and/or their property. You will be covered for the costs of your legal fees and compensation or settlement money that has to be paid out. Coverage will also protect you from any damages at your business premises, at a client’s home, or a client’s workplace.
Since public liability insurance is not a legal requirement, many businesses often overlook it as an unnecessary expense. But, public liability cover can be essential as it gives you the peace of mind to get on with the task at hand, knowing you’re covered should an unpredicted accident occur. Plus, it is considered an allowable business expense and is, therefore, tax-deductible.
If you’re contemplating taking out public liability insurance, this article will explain everything you need to know. From what public liability insurance is, what it covers, what it doesn’t cover, and if you need it.
Do I need public liability insurance?
If your business comes into contact with members of the public, then it may be highly beneficial for you to be protected with public liability insurance. This could be a customer’s visit to your business premises, you working on client premises, or working in public areas. Despite taking all possible precautions, accidents can and will happen, and it may be vital to be in a position where you don’t have to foot the bill yourself.
Most businesses decide to be insured for public liability to safeguard their business from accidents in the future. Compensation claims can be pretty steep; public liability insurance is designed to cover claims in the millions, which shows how important it is. Very few businesses are financially secure enough to operate without this protection. It’s up to you to determine whether you can afford to meet the costs should your business be sued for a claim and you don’t have cover.
What if I work from home?
Public liability insurance might seem relevant only for those who have to commute to a workplace such as an office, factory, or store. But, it can also be helpful for those working from home. You may not have regular daily contact with members of the public, but it can give you peace of mind knowing you are covered should anything happen.
For instance, a client who comes to your home to drop off supplies might trip over some boxes in your hallway, fracturing their ankle and leaving them unable to walk or work. Accidents can happen even if you’re home-based, and in such an event, you could potentially get sued for damages, and this is where public liability insurance would come in handy – it ensures you’re fully protected from this sort of claim.
Is public liability insurance a legal requirement?
Public liability insurance is not legally required by law, but that doesn’t mean you shouldn’t consider it. You’ll find that many clients or business-to-business relationships will often need you to be covered for public liability before even considering your services, just as a precautionary measure. Government or council contracts, in particular, will ask you to provide proof of public liability insurance before they will engage in business with you.
How much public liability cover do I need?
All businesses are different. Therefore, the level of insurance cover you need will hinge on how much risk your business is exposed to. For example, if you work from home and you interact with members of the public on an infrequent basis, you may only require a low level of protection. Conversely, if you are a business that interacts with many members of the public on a daily basis, you’re more at risk of an incident occurring, and thus more comprehensive cover may be better suited to your needs.
Here are some factors to consider when determining what level of public liability cover you need:
- Do your clients or business relationships require you to have a certain level of public liability insurance?
- Are you involved with trade associations or professional bodies that require you to have a certain level of public liability insurance?
- How often do you or your business come into contact with members of the public?
- Could your business activities cause damage to a member of the public and/or their property?
- Should someone make a claim against you and/or your business, are you able to pay the compensation costs and the legal fees?
Generally speaking, you are able to source public liability cover for as low as £1 million. This cover is for those businesses that have minimal contact with the public. For most small to medium-sized companies, however, you will want to be covered for around £5 million to ensure you are adequately protected, but it can go as high as £10 million for bigger businesses that need the additional cover. It’s good practice to find out the usual standard of cover for companies in your industry to gauge what you may need.
What exactly does public liability insurance cover?
When incidents occur and your business is sued by a client, customer, or member of the public, your business could be accountable for paying compensation. This could be in the form of pay-outs for financial losses, doing repairs, or medical treatment, but these are the costs that public liability insurance can cover.
The possibilities related to damage are endless, and therefore, the total coverage will vary slightly depending on how comprehensive your policy is. But, typically, you can expect the following claims to be covered under most policies:
Slips and trips
Someone falling or injuring themselves during a visit to your workplace. Suppose your client is visiting your premises for a meeting shortly after the floors have been mopped. There may not be a sign in place to warn them, and they slip, injuring their hip. It could also be from liquid being spilt on the floor in pubs or shops that leads to a slip or someone tripping over equipment at your workplace. Public liability insurance will cover you in all these scenarios.
You are obliged under a duty of care to ensure the workplace and its contents within the premises are well-maintained, but there can be wear and tear that goes unnoticed. This could be snagged carpets, loose-swinging doors, or protruding screws from a wall, all of which can lead to an accident.
Damage to belongings
It could be that a water leak has damaged a client’s laptop, an item is accidentally dropped onto a customer’s musical instrument, or an expensive ornament is knocked off a client’s shelf and broke – there are a plethora of accidents and damages that can occur which can’t be predicted.
This could be in the form of accidentally puncturing a water pipe, spilling paint on a carpet whilst decorating someone’s house, or damaging the exterior of a property when erecting and dismantling scaffolding.
Of course, this isn’t an exhaustive list, but most basic public liability insurance policies will cover the above claims.
What’s not covered under public liability insurance?
Whilst public liability insurance covers members of the public, customers, and clients, from accidents or incidents, it will not cover injury or damages to yourself, your employees, or your property. These should be covered by your business insurance.
You also won’t be covered if an employee decides to sue your business as this would be covered under employers’ liability insurance, something which – if you employ more than one person – you should already have since it is a legal requirement.
It should be noted that public liability insurance will not cover all the associated costs. As with any insurance policy, there will be an excess that your business will have to pay.
How does public liability insurance protect customers?
Suppose a customer, visitor, or any other member of the public, suffers an injury or damage to themselves or their possessions as a consequence of your business – this could be related to your business activities or at your business workplace. You’ll want to ensure that you are able to provide the customer with adequate compensation for the incident, regardless of whether it was a freak accident that happened despite the precautions you took.
What if I don’t have public liability insurance?
As mentioned earlier, public liability insurance is not a legal requirement, and therefore you won’t be legally penalised if you are uninsured. However, if your business is sued and you aren’t covered for public liability, you can expect to fork out quite a bit of money.
If the claim against you is successful, you could be accountable to pay a hefty settlement fee and could also be responsible for covering the legal fees of the person suing you. Additionally, even if you win and the claim against you is unsuccessful, you may still have to pay hefty legal costs to your solicitors, which would come out of pocket. This can be especially damaging for a sole trader or small business that may not have the funds to cover such costs.
What types of businesses need public liability insurance?
Most businesses serve the public in some form or another. Since public liability insurance protects you if you’re sued by a member of the public, it makes sense for most – if not all – businesses to be covered. Having said that, there are certainly some types of businesses that will benefit from public liability coverage more than others. Common industries and professions that have this coverage are:
- Construction – Builders, plumbers, carpenters, electricians, painters and decorators
- Beauty – Hairdressers, make-up artists, tanning salons, beauty therapists
- Home – Charities, cleaners, home-chefs
- Events – DJs, venues, caterers, equipment hire
- Leisure – Gyms, personal trainers, sports clubs, farms, zoos
- Retail – shops, supermarkets, restaurants, pubs, cafes, bars, takeaway
This is far from an exhaustive list, but as you can see, there is a wide variety of industries and professions that are recommended to have public liability insurance. This is mainly because of the frequency at which they interact with members of the public, which increases the chances of an incident occurring.
How do I find the most suitable public liability insurance coverage for my business?
The exact cover you may need will vary depending on if you are a sole trader or a business, what industry you are working in, how exposed to risk you are, and what level of coverage you will require. Therefore, an insurance broker will be able to assist you in finding the best coverage at the most competitive price.
Do I have to showcase my policy to customers?
Once you have taken out a public liability insurance policy, you will be provided with a certificate with the policy details. Unlike employers’ liability insurance, it does not need to be put on display for the public to see, as the policy is not a legal requirement. However, you may find it beneficial to display it in order to reassure the public and/or clients.
How much does public liability insurance cost on average?
This is a difficult question to answer. The premiums you pay will depend on how likely it is you will need to claim, and so it will vary for each business. For instance, a pub can be deemed to have a high chance of claiming due to how many people come and go on a daily basis. On the other hand, a freelance designer working from home who only sees their client once a month has a lower risk of claiming and, therefore, will see a lower premium.
Premiums can start from as low as £50, but for most small to medium-sized businesses, policies will cost much more than this. For those who need a policy that covers public liability insurance along with other liabilities, for instance, employers’ liability and business insurance, a cost-effective approach may be to take out commercial combined insurance. This will provide the customisability to be protected against multiple liabilities whilst also having them all under one policy at the most affordable price.
Do I need public liability as a sole trader?
Whether you are a sole trader, self-employed, or business owner, if you are in frequent contact with members of the public as part of your work, it would be a good idea to have public liability insurance.