What is public liability insurance?

Running your own business is exciting, but it can be stressful in equal measure. There’s so much to consider — especially when it comes to deciding what type of insurance you need.

There are many different types of commercial insurance available for business owners to buy. Policies can be separate or combined and they can be tailored according to your specific risks and individual circumstances — so you can rest assured you’re covered in case anything goes wrong.

Policies are not only there to protect you and your business. You can buy insurance to cover your employees, your customers and the general public too. One of the most important types of insurance you can buy is public liability insurance.

It’s likely you’ll have come across this when searching for business insurance, but you might be wondering what it is, what it covers, how much it costs and — most importantly — whether you need it. In this guide, we’ll answer all these questions and more, so you can make an informed decision about buying public liability cover.

What is public liability insurance?

Public liability cover is a type of commercial insurance that protects you if a client, visitor or member of the public makes a claim against you for injury or damage to their property as a result of your business activities.

Businesses of any size and industry can take out this insurance to cover their legal fees and any compensation payouts in the event that the claim results in legal proceedings.

Continue reading to find out more about public liability insurance.

Who needs public liability insurance?

Whether you’re a sole trader, limited company or partnership, you may need public liability cover. Accidents happen every day, and public liability claims can arise from all sorts of circumstances, from a customer slipping over on a wet floor at your business premises to you spilling coffee on a client’s mobile phone during a meeting. Buying the right public liability insurance gives you peace of mind that you’ll be protected in instances like these.

It’s also worth bearing in mind that some trading authorities and other organisations require businesses to have a certain level of public liability cover, and some customers will also request that you have it before they sign a contract with you.

While public liability insurance isn’t a legal requirement, if you deal with the public in any way, it’s worth considering so you’re not landed with hefty legal fees you can’t afford to pay.

Some examples of occupations that may need public liability cover include, but are not limited to:

BuildersCleanersEvent managersGardenersHairdressersIT contractorsPersonal trainersRestaurant and cafe ownersRetailersScaffoldersTradespeople

What does public liability insurance cover?

As mentioned above, public liability insurance covers you in the event that your business is sued. It covers your legal fees and compensation payouts (up to the limit of your policy) if a claim is made against you by a member of the public. 

The term ‘public’ generally refers to anyone who isn’t employed by you but who may be on your premises or directly affected by your business activities. This can include clients, contractors, customers, passers-by and suppliers.

Some of the things that can be included in your policy are:

Flexible cover options — You can choose how much cover to get. Options can range from £1 million to £10 million.Injury — Covers you for accidental injury to members of the public. If your business is a partnership, it could also include injury cover for working partners.Legal fees, expenses and compensation — Covers your legal costs if you have to attend court.Products liability — You’ll be covered if a product you make or supply causes illness or injury to someone or damages their property.Property damage — Covers you for accidental damage to another person’s property. This can include vehicles and personal possessions.

Some of the things a public liability insurance policy won’t normally include are:

Damage to property you own or that’s in your controlEnvironmental damage that occurs from pollution or contaminationClaims relating to asbestosPayment of penalties and finesRepair or damage costs to work you completed or a product you supplied

Does public liability insurance cover my employees?

It’s important to note that public liability insurance only provides protection against claims made by third parties. This means it doesn’t cover you or any of your employees, including volunteers, temporary staff and borrowed workers. You will need to take out a separate type of commercial insurance policy for this, which is called employers’ liability insurance.

If you employ one or more people, you’re legally required to have employers’ liability insurance to cover you for compensation claims made by an employee who has suffered illness, been injured or had their property damaged as a result of the work they do for you.

How much public liability insurance should I have?

Public liability insurance isn’t a legal requirement, so it’s up to you to decide how much cover to get. Most insurers will give you the option of £1 million, £2 million or £5 million, so you can choose the amount of cover that suits you best.

When deciding on how much cover you need, bear in mind that you’ll need enough to pay potential legal fees and compensation costs. To make the right decision, you might find it helpful to ask yourself the following questions:

How big is my business?How often do I come into contact with the public?What’s the level of risk associated with my industry?What’s my claims history?

It’s also a good idea to consult with any clients and industry bodies to see whether they expect you to have a particular level of cover.

How much does public liability insurance cost?

As with any type of insurance, the cost of your policy will vary depending on factors like the nature of your business, the industry you operate in, where your company is located and how much cover you choose.

Companies that insurers view as riskier will usually pay a higher premium, but the best way to find out how much you’ll have to pay for public liability cover is to contact a broker like A-Plan. They’ll ask you a series of questions to determine the cover that’s right for your business and then get back to you with tailored quotes from a range of providers. Going through a broker not only means you’ll be covered for everything you need to be and won’t get caught short if the worst happens, but you won’t be paying extra for unnecessary add-ons.

Some of the things an insurer will consider when deciding on the price of your quote are:

How often you use dangerous equipment as part of your business activitiesIf you operate in an area with a heavy footfall and have consistent interaction with members of the publicWhat your turnover is (as a high turnover usually means more clients)How many employees you haveWhether you want to pay in monthly instalments or make one annual payment

Is public liability insurance tax-deductible?

HMRC classes insurance as an allowable expense. This means that when you do your tax return, you can deduct the cost of your public liability insurance — and other types of business insurance — from your gross income and reduce the amount of tax you have to pay.

What other types of insurance should I consider for my business?

Every business is unique, which means the type of insurance a company needs can vary greatly. Depending on the type of business you run, you may want to consider adding some of the below policies to your commercial insurance:

Commercial property insurance — Covers your building for things like accidental damage, vandalism and theftCommercial vehicle insurance — This is a legal requirement if you drive a vehicle for work purposesEmployers’ liability insurance — This is a legal requirement if you employ one or more people to work for youKey person insurance — Protects your business if someone key to your company dies or becomes so ill they’re unable to workPersonal accident cover — Protects the business if you or one of your employees suffers an illness or injury that prevents you from workingProduct liability insurance — Covers the cost of claims made for injury or illness caused by your productsProfessional indemnity insurance — Covers claims of fault with the work you’ve providedTool and equipment cover — Cover in case your tools and equipment are lost, stolen or damaged

Summary

There are many different types of commercial insurance available for business owners to buy, but one of the most important is public liability insurance.

This type of insurance covers you if a client, visitor or member of the public makes a claim against you for injury or damage to their property as a result of your business activities.

With public liability insurance, you can rest assured that your legal fees and any compensation payouts will be covered in the event that the claim results in legal proceedings.

Public liability insurance isn’t a legal requirement, but any business that deals with the general public should consider buying it so they’re not landed with hefty legal fees they can’t afford to pay. It’s also worth noting that some trading authorities and customers will require businesses to have a certain level of public liability cover.

Some of the things that can be included on your policy are flexible cover options, injury, legal fees, expenses and compensation, products liability and property damage. Public liability insurance won’t normally include damage to property you own, environmental damage, payment of penalties and fines and repair or damage costs to your work.

Public liability insurance doesn’t cover you or any of your employees, so if you employ one or more people, you’ll need employers’ liability insurance — which is a legal requirement.

It’s up to you to decide how much cover you get, but most insurers will give you the option of £1 million, £2 million or £5 million.

The cost of your policy will vary depending on factors like the nature of your business, the industry you operate in, where your company is located and how much cover you choose. HMRC classes insurance as an allowable expense, meaning public liability insurance is tax-deductible.

Some of the other types of insurance you may want to consider for your business are: Commercial property insurance, commercial vehicle insurance, employers’ liability insurance, key person insurance, personal accident cover, product liability insurance, professional indemnity insurance and tool and equipment cover.