What is Public Liability Insurance?

All Which? Trusted Traders need to have public liability insurance to get endorsed - but why is it so important?

If you’re planning on setting up your own business down the line, getting the right types of insurance to cover you and your employees is absolutely essential – after all, you want to ensure you and your company are financially protected from unforeseen accidents and mishaps.

However, while personal and employer’s liability insurance are both very important, as a trader, the single most important piece of insurance you can invest in is public liability insurance.

Read on to find out the benefits and potential consequences of trading without sufficient cover.

What does public liability insurance mean?

Without getting too in-depth, public liability insurance protects you and your business from claims made by customers or members of the public that could result in legal proceedings - specifically as a result of being injured due to your work or from accidental property damage.

More specifically, if someone tried to sue your business, public liability insurance would cover the financial cost of your legal defence, plus any compensation or settlement money you may have to pay out as a result.

What is covered by public liability insurance?

In general, public liability can be pretty all-encompassing when it comes to the type of injuries and property damage covered.

For example, if you’re a plumber working in a client’s home and you accidentally flood their house, or your client slips and breaks a bone on the wet floor that you failed to notify them about, they could potentially sue you.

However, if you have public liability insurance, your policy would be in a position to cover the legal fees and compensation costs associated with this, but only up to the limit specified by your policy.

What are the different types of public liability insurance?

The distinctions between public liability policies will typically come down to coverage limits, rather than whether or not specific accidents and injuries will be met by your insurer.

But this is not to say that all public liability policies cover exactly the same incidents. For example, most public liability policies will provide financial protection against personal public injuries and property damage in public spaces.

However, you may need to take out a different policy if you want cover against public property loss, injuries on your business premises itself – or in the worst-case scenario – the accidental death of a member of the public.

What doesn't public liability insurance cover?

While public liability insurance is very important, it doesn't cover everything. There are absolutely other kinds of insurance you might need to invest in for your business, the specifics of which will vary depending on your line of work.

For instance, professional indemnity insurance covers any claims around faults with your work, while employers’ liability insurance covers claims made by your own employees. Then there's personal accident cover, which protects your business from financial troubles if you or a key team member are unable to work due to an illness or injury.

Naturally, not all businesses will need every type of insurance cover, but it's important to consider what's available to ensure that you and your business are fully covered should something unfortunate take place.

Does public liability insurance cover my employees?

No, public liability does not protect your business against claims made by your employees. In order to gain cover for this, you will need to invest in employer’s liability insurance – which is a legal requirement for businesses in the UK.

Who needs public liability insurance?

It’s practically universally recommended for all businesses, no matter what industry they operate in – but especially for those who work regularly in public spaces.

While not a legal requirement, if your business interacts with the general public in any way – be that serving them as customers or operating in public spaces - then it’s important to have cover in place to protect your business against the potential costs of any claims.

What's more, some trade bodies and other organisations (such as us here at Which?) might require you to have a certain level of public liability insurance in place before they consider working with you.

In other words, a public liability policy not only protects you from unforeseen mistakes and accidents but can also act as a key pillar in your business plan to help you secure new work opportunities.

How much public liability insurance do I need?

It’s difficult to say exactly how much public liability insurance your business will need, and most public liability insurance policies can range from anywhere between £1m and £10m. But generally speaking, the higher your cover limit the better – that way, you’ll have a much greater safety net to cover any legal fees if they arise.

As for specific limits, it's best to discuss the amount of coverage you require with your insurance provider or broker. While a high level of cover is good, too much may see you spending far more than you need to, whereas too little may mean your business has to make up the shortfall of these costs should legal action be brought against you.

What should you bear in mind when looking for public liability insurance?

Besides cover limits, the one other major thing you need to bear in mind when looking at public liability insurance policies is whether or not that policy will cover the type of work you carry out.

Certain public liability policies may exclude particular types of work, such as imposing limits around height restrictions. So, before you take out a new policy, you should also double-check some of the finer details to avoid invalidating your cover, such as:

• What size businesses are covered under the policy?
• How much money does your business need to make?
• Whether or not subcontractors or temporary employees are covered, or if they’re required to have their own public liability insurance.

How much does public liability insurance cost?

Like all types of insurance, the cost of public liability insurance will vary from business to business, and there are several factors that can affect the cost of your policy. These typically include:

• The size of your business.
• The level of interaction your business has with the public.
• The value and length of your contracts.
• Your claims history.
• The level of risk associated with working in your industry.

For instance, a small company that mainly has low-value contracts and rarely comes into contact with the public will be perceived as fairly low risk and can expect to pay a cheaper public liability insurance policy as a result.

However, the same insurance provider may view a much larger company with lots of staff that takes on months-long contracts and operates in busy public areas as being a riskier prospect, and therefore charge more for its policy.

To find the best deal for your business, it’s often a good idea to compare quotes from numerous providers to make sure you’re getting the best deal or enlist the help of an insurance broker to ensure you’re getting the right sort of policy for your needs.

What happens if I don't have public liability insurance?

Although public liability insurance is not a legal requirement, failing to acquire this sort of cover could land you with a large bill if an incident arises where your company is sued for the likes of personal injury damage and associated compensation – this may run into several thousands of pounds, which is not feasible for many small businesses to cover.

And as we mentioned earlier, a lack of public liability insurance may also bar you from becoming a member of a trader association or an endorsement scheme, such as Which? Trusted Traders.

Finally, for a member of the public, a lack of public liability insurance shows a clear disregard for their safety, and there’s a very good chance you will lose out on potential customers by not having this sort of insurance in place.

Grow your reputation as a Trusted Trader

With all of the essential points covered, you should hopefully have a much better idea of what public liability insurance is, and why it’s so important for your business to have this sort of policy in place from day one.

And once you do have a public liability policy set up, you’ll be eligible to sign up as a Which? Trusted Trader.

Once you pass our vetting process, you’ll get access to your own personal business profile to display reviews and examples of your work, as well as a direct account manager to assist you.

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When customers see you displaying our logo, they'll know when you're a trader they can trust

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