What is Public Liability Insurance?

All Which? Trusted Traders need to have public liability insurance to get endorsed - but why is it so important? Read on to find out the benefits of having this kind of insurance as a trader, and the potential consequences of trading without sufficient cover.

If you're not yet a part of our scheme and would like to benefit from tailored advice from our expert team, find out how to become a Which? Trusted Trader.

What is public liability insurance?

Public liability insurance protects businesses of any kind - whether you're a sole trader or a small business - in case your business is brought to court by a client, customer or a member of the public. 

If someone tried to sue your business, public liability insurance will cover the cost of your legal defence, plus any compensation or settlement money you may have to pay out.

It should also be able to cover your costs if someone is injured as a result of your business activities.

What does public liability insurance cover?

Public liability insurance can cover legal costs and compensation payments if your business is held responsible for injury or property damage to a client, contractor or another member of the public.

Imagine you’re a plumber working in a client’s home and you accidentally flood your client’s house, or your client slips and breaks a bone on the wet floor which you failed to notify them about.

In both cases, your client could sue you. However, if you have public liability insurance, your policy could then cover the legal fees and compensation costs, up to the limit of your policy.

Who needs public liability insurance?

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

What's more, some trade bodies and other organisations might require you to have a certain level of public liability insurance in place before giving you certain types of endorsements.

Therefore, a policy doesn’t only protect you from mistakes and accidents – it can also help you secure new business opportunities.

What doesn't public liability insurance cover?

While public liability insurance is very important, note that it doesn't cover everything. There are other kinds of insurance you might need, which can vary depending on your business.

For instance, professional indemnity insurance covers any claims if there's a fault with your work, while employers’ liability insurance covers you specifically for claims from employees. Then there's personal accident cover, which protects the business if you or a key team member suffer from an illness or injury and are unable to work. Office insurance protects the premises you work from.

Not all businesses will need every different type of insurance cover, but it's important to think what's on offer to make sure you and your business are fully covered, should something unfortunate take place. 

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

The main thing you should look for from public liability insurance policies is the amount of cover it offers, ensuring it's sufficient for the risks your business may present.

Most public liability insurance policies range from £1m to £10m. It's best to discuss the amount of cover you require with your insurance provider or broker; having far too much cover may mean you'll end up spending more than you need to, while too little cover may mean your business would have to stump up the costs of a claim.

You also need to find a policy that covers the type of work that you carry out. Look for exclusions or endorsements in the policy. For example, some policies have 'work at height' restrictions, which may be tricky for traders like roofers if jobs have to be carried out at heights that exceed their policy.

Before you take out a new policy, you should also double-check some of the finer details, for example:

• the number of employees or people involved in the business
• the turnover of the business
• whether your subcontractors or temporary employees are covered, or if they are required to have their own public liability insurance.

Any discrepancies with this kind of information could invalidate your policy.

Roughly how much does cover cost?

The cost of public liability insurance can vary, with several factors that can affect the cost of your policy. These include:

• the size of the 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 the industry.

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

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 may therefore charge more for its policy. 

A number of price comparison sites offer quotes on public liability insurance, so it's worth checking online to get an idea of prices. An insurance broker may also be able to help make sure you opt for the right amount of cover.

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

Failing to get public liability insurance 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 can run into several thousands of pounds, which is not feasible for many small businesses to cover.

It may also bar you from becoming a member of a trader association or an endorsement scheme such as Which? Trusted Traders.

If you want to find out more about how being a Which? Trusted Trader can help you stand out from the crowd, sign up to Which? Trusted Traders now.