What is public liability insurance and what does it cover?

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What is public liability insurance?

Public liability insurance is a form of business insurance designed to cover you if a member of the public claims to have been injured, or had their property damaged, because of your business. Your insurance would then financially protect you against any legal proceedings that follow the claim, including any compensation that may be owed.

While it’s not a legal requirement to have public liability insurance in place, some clients may ask that you’re covered for public liability before agreeing to work with you. So, in some cases it does more than protect your business - it could also secure you new opportunities too.

What does public liability insurance cover?

Should a member of the public claim to have been injured or had their property damaged as a result of your business activities, public liability insurance could cover the cost of compensation. Your insurance may cover the cost of compensation for personal injuries, loss of or damage to property and death.

While policies can vary depending on the terms of your policy, most insurers will cover you for:

Incidents that occur on your business premises
Incidents that occur off-site, at events or activities organised by your business

Your policy may also cover the cost of legal fees as a result of a claim against you.

What doesn’t public liability insurance cover?

What is and isn’t covered by public liability insurance will depend on the terms of your policy, but there are several common exclusions you need to be aware of. For example, claims made by an employee against you for damage or personal injury aren’t covered by public liability insurance - you’ll need employers’ liability insurance for that.

Other circumstances that aren’t likely to be covered include:

Pre-existing issues or claims: Your policy isn’t likely to cover any issues that occurred before you took out your policy. Usually, you’ll only be covered for claims that arise once you’re insured.
Hazardous materials or substances: If an accident was caused by a dangerous substance such as asbestos, it’s not likely to be covered.
Criminal acts: It may sound obvious, but insurers are unlikely to cover property damage or injuries that were a result of breaking UK laws or criminal behaviour.

Why do you need public liability insurance?

Becoming an entrepreneur opens the door to new, exciting opportunities but an equal amount of risks. As much as we can try to prepare for the unexpected, accidents do happen and can have legal and financial consequences. Public liability insurance is designed to protect your business should the worst happen and a member of the public claims they were injured or their property was damaged as a result of your business activities.

Let’s say you open a retail business and a customer trips over a cable in your shop leading to a serious injury. Without public liability insurance, you could be liable for not just medical expenses but legal fees, which can add up quickly and significantly impact your business’ financial wellbeing.

As we mentioned earlier, public liability insurance isn’t a legal requirement, but it can be a massive benefit. Some clients may even ask that you have public liability insurance as a condition of their trusting and working with you. With a policy in place, you’ll have the peace of mind that should disaster strike, you and your business won’t be financially liable.

How much public liability insurance do you need?

How much public liability insurance you need will ultimately depend on the nature of your business. After all, each business is unique and the amount of cover you need will depend on the types of clients you work with, how much you interact with the public and your level of risk. Different insurers will cover you up to different amounts, ranging from £1m to £10m. Your cover limit is the maximum amount your insurer will pay out should you need to claim (and that claim is covered).

When deciding on the level of cover you need, you’ll want to consider the following:

Your clients’ expectations: Depending on the industry you operate in, your clients may expect a level of cover as a condition of working with you. For example, a client may ask that their suppliers have at least £5 million of public liability cover. If you go ahead with the work but do not have it, you will be in breach of contract.
Your level of risk: Will your business regularly interact with members of the public? If so, there is a higher chance of compensation claims, especially if you work in a higher risk industry such as construction. It’s also important to consider the repair costs involved should damage to property occur, for example.
Trade bodies/associations: If you’re looking to join a trade body or association, you may be required to have a particular level of public liability insurance.

How to get public liability insurance in the UK

While insurance can sound complicated, taking out a public liability insurance policy in the UK is usually a straightforward process.

Here’s how to find the right policy for you, step by step:

Work out what you need: Assess the level of protection you need. This will largely depend on the industry you work in, how much interaction you have with the public and your level of risk. From there, you can decide on how much cover you need.
Shop around: Use comparison tools to compare policies from different insurers.
Read the fine print: Make sure your policy covers what you need it to and watch out for any exclusions.
Complete your application: Once you’ve decided on your policy and insurer, you’ll need to fill out your application. You’ll usually be asked to provide your business details, including your annual turnover, your business’ industry and the number of the employees. Try to be as honest and accurate as possible so you aren’t left unprotected.
Review annually: Make sure you review your policy on an annual basis, as well as whenever there’s any change to your business. That way, your policy will continue to protect you as your business grows.

Tips for managing your public liability insurance

Public liability insurance is more than just a formality. Rather than getting your policy and then forgetting about it, you’ll need to review your cover regularly to ensure it still provides the right level of protection.

Here are some tips to help you manage your public liability insurance:

Review your policy regularly: As your business evolves, your risks are likely to change too. Make sure you review your policy, especially if you go on to offer new services or operate in new, different locations, to ensure your coverage is enough to protect you.
Keep records accurate: Make sure you keep your documentation up to date, such as any risk assessments, incident logs and contracts. That way, should you need to make a claim you’ll have all the information you need to hand.
Prioritise risk management: Keep accidents to a minimum by implementing health and safety measures for your business. Invest in regular training for staff, clear signage and equipment checks to ensure everything is working safely and correctly. Doing so could reduce your need to claim and potentially lower your premiums.

Ready to chase your dream?

Sorting out your business insurance is a vital step in your business journey. Now you’ve got your head around how public liability insurance works, you’re one step closer to making your business dream a reality.

Ready to get started? With SUAZ, you can form your company completely free of charge, and you’ll have professional advice and support to hand whenever you need it. Form your limited company today.