What is public liability insurance?
Public liability is a legal cover that provides self-employed individuals and businesses with legal defence against claims of a specific nature:
- An injury to a customer or a third-party
- Physical damage to third-party property
- Death to a customer or a third-party
- made by a third party that occurs as a result of their business activities.
The cover also provides financial protection against the cost of compensation if you are found liable, helping mitigate the financial risk of being self-employed or running a business.
Even when not required by a contract, self-employed public liability insurance is recommended as a precautionary measure, as even minor incidents can result in costly compensation claims.
What does public liability insurance cover?
If you are accused of causing physical harm to a third party or their property, you are likely to be asked to pay compensation.
Public liability insurance typically covers the cost of compensating third parties for:
- Bodily injury: covers medical expenses, lost income, and other costs associated with physical harm caused to a third party.
- Property damage: covers the cost of repairing or replacing property that has been damaged by the business.
In addition a public liability policy should also cover the cost of defending against a liability claim, including all the legal fees and other related expenses.
Public liability insurance at Suited
What does public liability insurance not cover?
Public liability will not cover your professional mistakes or negligence that resulted in a financial loss to your clients. This includes an injury resulting from wrong advice—e.g., a yoga teacher's instructions leading to a back injury.
It excludes any kind of employers' liability. There is a specific product called employers' liability that you'll need if you have employees.
Who needs public liability insurance?
If, at any point during the course of your daily business activities, you have face-to-face contact with your customers or members of the public, you should take time to understand the benefits of self-employed public liability insurance.
Without public liability insurance you could face serious financial implications, should someone make a claim against you. Legal costs add up very quickly, not to mention any possible payout. However, there are other reasons why you might need public liability insurance:
- Your work contract requires it. If you don't comply with the contract condition and it is discovered, you may lose work and be in breach of contract.
- Pitching for work. Having public liability insurance in place is a competitive advantage which could help you secure a work opportunity. Always mention it to prospective customers.
- It's a trade/profession membership condition. Certain professions need or want to become part of professional bodies or trade associations, and PL insurance is a registration requirement. If you fail to comply, you could be struck off.
Is public liability insurance required by law?
Public liability insurance may be compulsory. While no law in the UK requires a business or a self-employed individual to hold public liability insurance, your professional standards body, local authority, or customers may require it.
How much public liability insurance do I need?
The good news is that the number of public liability claims has reduced in the last decade. On the other hand, it seems that almost every claim results in defence costs and some kind of compensation.
We have learnt that in 2020, the UK registered over 70,000 PL claims and about 90% of those have resulted in a settlement.
Where compensation is concerned, it varies from claim to claim, as you would expect. In respect of bodily injury, it is always several thousand at the lower end and has been known to go up close to £500,000 for more severe injuries. Settlements for property damage can be a lot higher and run into millions.
Consider the level of risk during the business activities you carry out. For example if your office is on the top floor of an old building without a lift with steep stairs and no handrail, the likelihood of one of your visitors suffering a fall is quite high.
In other words, the circumstances of your business should be the guide to determine what policy limit you need to buy.
