Does my business need public liability insurance?

All businesses can face the prospect of someone suing them for causing damaging their health or finances.

For protection against the cost of having to pay out compensation, businesses can take out various types of insurance to cover specific risks.

Public liability insurance isn’t compulsory, but here’s why it’s very useful to have.

What is public liability insurance?

Public liability insurance covers your business against the costs of compensation should a member of the public claim against you for an injury, illness or damage to their property.

This type of business cover is specifically for claims made by people who are not your employees – for that you need employer’s liability insurance, which is required by law.

Unlike professional indemnity policies, which protect against mistakes made when carrying out work, public liability insurance covers you for accidents that happen either on your premises or in the course of your business activities.

Many businesses need both types of insurance, depending on the nature of their work.

What exactly does public liability insurance cover?

The amount of public liability coverage you have depends on your policy, but the following incidents are usually included:

• Slips and trips – someone has a fall or injures themselves when visiting your workplace or because of your equipment, such scaffolding
• Food poisoning – a member of the public gets food poisoning after eating food you’ve prepared
• Property damage – accidents that cause damage to a property, such as puncturing a water pipe or spilling paint over the carpet
• Damage to belongings – mishaps that have damaged belongings such as laptops, musical instruments and furniture

Should one of these accidents occur and the person decides to raise a claim, you are likely to have to pay compensation to cover things like repairs, medical treatment and financial losses.

Having the right public liability insurance policy in place means the full sum won’t have to come out of your pocket.

Who needs public liability insurance?

Unlike employers’ liability insurance, which is a legal requirement for most employers, public liability insurance isn’t compulsory.

But it is usually a good idea to have a policy in place, especially if you fall into one of these categories:

• Customers visit you – whether at your home or at your work premises, customers could injure themselves when visiting you
• You visit customers – if you need to carry out work to their property or you take your equipment to their house, your work could cause injuries or damage
• You work in public – the work you’re carrying out and the equipment you use could harm a property, a customer or a member of the public

Both big and small businesses, as well as charities, may need to take out cover because any member of the public affected by their work could claim compensation if something happens.

Here are some of the common professions and companies that are recommended to have a policy:

• Construction companies – builders, decorators, plumbers, electricians
• Events companies – venues, caterers, DJs, equipment hire, some charities
• Beauty businesses – hairdressers (both in salon and mobile), beauty therapists
• Home businesses – cleaners, charities offering home visits
• Leisure businesses – personal trainers, gyms, sports clubs, zoos, farms

There are one-day policies available if you are only running an event or offering your services for one day.

What happens if you don’t have public liability insurance?

Although not required by law, public liability insurance is important because the costs of compensation can be tens of thousands of pounds.

A business of any size would rather avoid paying expensive compensation, but it can be especially destructive to a small business or sole trader without any insurance to cover most of the costs.

When you take out a policy, you’ll be given a certificate that includes information about your policy to show exactly what is covered.

It is a legal document, but it isn’t compulsory to display the certificate for the public to see, unlike the certificate for employers’ liability insurance.

Some businesses like to display them though, to help reassure the public and new clients.

Because it isn’t possible for a member of the public to find out if you have a policy, other than by asking you for proof, some people use clauses in contracts to state that it must be in place.

How much public liability insurance do I need?

The level of cover you need depends on your exposure to risk, for example, how many people interact with your business and the amount of potentially dangerous equipment you use.

Generally, the minimum you can take out is £1 million and the maximum is £10 million, with lots of businesses opting for around the £5 million mark.

If you have more than one trade (for example, you’re primarily a plumber but you are a personal trainer part-time) you may be able to get both professions covered on one policy.

However, you might need specialist polices to cover all your risks.

How much on average does public liability insurance cost?

Your premiums will be based on how likely you are to need to claim, so it will be different for various professions.

Premiums tend to start from around £50, but most policies will cost more than this to cover all the associated risks.

You might find it more cost-effective to take out one policy that combines other types of cover you need, such as product liability, employers’ liability and professional indemnity insurance.

These may all come under a policy known as commercial combined insurance.

Public liability insurance counts as an allowable expense, so it is tax deductible.

How to take out the right public liability insurance

Getting the right policy is vital for making sure your business is properly protected and that the cover is cost-effective.

You can compare quotes yourself online or over the phone, or go through an independent financial adviser (IFA) who will search for polices that suit your individual needs and help you access more niche polices.

Your accountant may also be able to advise you on the level of cover you may need.

All policies are required by law to have a cooling off period of at least 14-days, so you can cancel within this timeframe if you change your mind.