What is Public Liability Insurance?

Claims can be expensive, and having public liability insurance in place limits damage to your business.

Updated: May 22, 2024
Matt Crabtree

Written By

Matt Crabtree

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Owning a business comes with many risks. You can't see into the future and know which ones are coming your way; accidents happen, and sometimes you can't prevent them.

Still, you can prepare your business with public liability insurance to reduce the impact of any potential claims from members of the public.

Public liability insurance covers the cost of payouts and legal fees if a third party sues your business. If you're not from the UK, you may know this insurance policy as general liability insurance. Although the two have different names, they are the same.

You can take out public liability insurance if you're self-employed, a sole trader, in a partnership, if your business is in trade associations or any business that works with the public.

Without public liability insurance, your business could be personally liable to pay any compensation claims taken out against your company. Claims can be expensive; a minor incident may result in a significant claim and payout. Public liability cover will cover the cost of most incidents that occur within or because of your business.

In this article, you'll learn what is public liability insurance, what liability insurance covers, compensation costs and more.

Which Businesses Need Public Liability Insurance?

There is no legal requirement to have public liability insurance, and not all businesses will need liability insurance, but it is always better to be sorry with business insurance. You could save yourself money down the line. Most, if not all, businesses should consider public liability cover as it includes clients and the general public.

You should consider public liability insurance if your business activities fall under the following:

  • Customers visit your business's premises: If you're a shop owner or run an office, you could be sued if harm comes to your customer or client or their possessions whilst on your property.
  • If you work in a client's home: If you're a tradesman or someone who carries out work in people's homes or property, you can be liable for any property damage caused by you or your work.
  • You work in a public area: For example, if you work on a construction site, there is a chance your work could cause damage to someone passing by or visiting the site.

If potential harm occurs in or because of business, you should consider getting public liability cover. If your business falls into one of the following industries, you may benefit the most from public liability insurance coverage:

  • Contractors, building and manufacturing.
  • Event organisers and licensed traders.
  • Retailers, restaurants and other hospitality areas.

If you provide a product that your clients use, and something goes wrong with that product and causes damage, you may also be liable. However, public liability insurance doesn't cover harm caused by faulty products.

Product liability insurance is different to public liability and employee liability insurance. Product liability insurance protects you against compensation costs for potential injuries caused by your faulty product.

Again these insurance policies aren't a legal requirement, but they're ideal to reduce impact and cover claims so you don't lose vast amounts of money on compensation payouts.

What Incidents Does Public Liability Insurance Cover?

You may be wondering what public liability insurance covers, and there are four types of incidents your insurance covers claims.

Accidents happen, but they can quickly become hefty compensation payouts. You might not think you need public liability insurance, but if something were to occur to a member of the public on your premises, you'd be held responsible and won't be covered, and it could be costly.

Public liability insurance covers the following situations:

  • Personal injury: If customers have access to your business premises and they trip and hurt themselves, you could be asked to cover medical bills. So, if you conduct business on a construction site and a client or customer incurs an accidental injury, you are liable. Public liability coverage ensures your insurer will pay out for any claims.
  • Property damage: If you or an employee take an accidental trip and spill coffee on a client's laptop or cause damage to property belonging to a member of the public, they can put in property damage claims. You'll be expected to pay for replacing or repairing the damaged item(s).
  • Illness: If a public member becomes sick, perhaps because the food you've served hasn't been prepared correctly or there's been contact with dangerous chemicals, you would be liable.
  • Death: If your work accidentally causes someone's death, your insurance will protect your bottom line if you're taken to court for a compensation claim.

So, what happens if one of your employees is hurt whilst working for you? Public liability insurance doesn't cover employees.

Your employees could sue you if they have an accident in the workspace, and as mentioned earlier, claims can get expensive. So, consider taking out employers' liability insurance to reduce the financial impact on potential employee claims.

What Expenses and Costs Does Public Liability Insurance Cover?

Third-party claims can get expensive if you don't have public liability insurance.

How much cover you'll pay will depend on the severity of each claim. You should ensure you have enough cover so you're not left too out of pocket if an incident occurs concerning your business.

Public liability insurance covers the following costs and claims:

  • Legal fees: Liability insurance covers all legal fees, including the cost of hiring a lawyer, court fees, and, if it comes down to it, the other side's legal fees.
  • Compensation claim: Depending on how much coverage you take out, your insurer will pay most of the money towards any potential compensation claims. Compensation claims involve paying for medical bills, income loss caused by the incident, and property damage if your business is held responsible.

How Much Public Liability Insurance Do You Need?

Public liability insurance costs may depend on how much cover your business needs.

There are different levels of public liability, and the amount of cover required will depend on various factors:

  • How much work do you have with the public: For shop owners, your premises are guaranteed to have a lot of customer contact. If you're a business that runs an office, your clients will likely visit you. If you're a business with a lot of contact with the public, consider higher insurance coverage. In contrast, if you don't work with the general public daily, consider a lower level of insurance coverage.
  • Size of your projects: If you work in construction, you'll usually have a much higher public liability policy than an officer work, and that's because there are typically more risks in construction than in an office.

Public liability insurance providers cover limits of £1 million, £2 million or £5 million. The cover level is the maximum amount your insurer will pay out in the event of a claim. Cover levels are high because insurers consider the potential loss of earnings, ongoing care and medical costs, and any legal fees involved.

The public liability insurance cost will depend on your insurer. You can pay as little as £3.14 monthly for public liability insurance cover. Have a look around to get the best deal.

Final Thoughts

If you work with people outside of your business, it's best to make sure you're covered in case any accidents do occur concerning your company. Claims can be expensive, and having public liability insurance in place limits damage to your business.

For extra cover, consider taking out employers' liability insurance to cover employees and product liability insurance to cover any damage caused by faulty products. It's better to be safe than sorry.

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