What is public liability insurance?

Public liability insurance is one of the most popular types of business insurance among small business owners. Here’s everything you need to know about this type of cover.

What exactly is public liability insurance?

Public liability insurance is a form of business insurance designed to pay out if a customer, client or a member of the public makes a legal claim against your business. 

This could be because they injure themselves while on your business premises, for example.

When you make a successful public liability insurance claim, the payout can cover your legal costs as well as any compensation due to the individual in question

Public liability insurance isn’t obligatory for most businesses. But it could make the difference between your company surviving legal proceedings  or going bust due to the costs involved.

Some trading bodies and organisations also require member companies to have a certain level of public liability cover in place. And some companies only work with contractors and suppliers that have a set amount of this type of cover.

Read more: 

• How to claim on your business insurance

• How much business insurance cover do I need?

What type of businesses need public liability insurance?

Not all businesses need all types of business insurance. 

However, if you provide a service, practise a trade, or have clients or customers visiting you at your business premises, it could be a wise move to get public liability insurance.

Reasons to take out public liability insurance include:

• You provide a service, such as catering or hairdressing

• You practise a trade, such as building or plumbing

• You have business premises, such as a shop or restaurant, that are visited by customers or clients

• You conduct off-site meetings with customers, clients or suppliers

• Your activity involves using equipment that could injure a member of the public

Read more: 

• Do I need business insurance?

• What is public liability insurance? 

What does public liability insurance cover?

Public liability insurance can cover legal costs and compensation payments related to a claim against your business for:

• Personal injury, including death, to anyone from a supplier to a passer-by

• Damage to or loss of another’s property

So, you could receive a public liability insurance payout to cover compensation and legal costs related to a wide range of incidents, including: 

• A customer tripping on a loose tile in your shop

• A passer-by injuring themselves on machinery you are using

• Spilling tea on your client’s laptop

What doesn’t public liability insurance cover?

Public liability insurance doesn’t cover:

• Employees’ claims against your business by employees. You need to get employers’ liability insurance for this. 

• Legal claims that relate to a professional service or advice given. For example, advice from an accountant. You need to get professional indemnity insurance for these types of claims. 

Read more:

• What is employers’ liability insurance?

• What is professional indemnity insurance? 

How do I make a public liability insurance claim?

If a person is injured or their property is damaged because of an incident involving your business, it’s sensible to contact your public liability insurance provider – even if no claim has been made yet.

You should also:

• Take action to limit any injury/damage as quickly as possible

• Take photographs showing what happened

• Write down the details of the incident, including the date and time

• Record the contact details of anyone present, in case you need witness statements at a later date

Your insurance company need all this information, as well as your policy details and, where possible, an estimate of the costs involved.

How much public liability insurance do I need?

What level of cover your business needs depends on both the size of the company and the level of risk involved in your business activity.

You can buy public liability policies providing between £1 million and £10 million or cover.

If, for example, you work from home providing consultancy services, the likelihood of you facing a legal claim because of an accident is fairly slim.

But if you work in public places or have premises that are open to the general public, the risks involved are much higher. And the potential size of any claims is higher too.

Some clients and trade associations also insist that businesses they work and associate with have a certain level of public liability cover.

If this is the case, they may want to see a business insurance certificate proving you have the cover you say you do.

Read more: When do I need to show my business insurance certificate? 

Is public liability insurance a legal requirement?

No, public liability insurance isn’t a legal requirement. But some companies and trade bodies only work with suppliers and service providers that have a certain level of public liability insurance. As almost all businesses have some level of contact with the public, it’s also worth considering whatever sector you are in.