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Public liability insurance protects your business financially if a member of the public sues you over an injury or damage to their property caused by your company’s activities.

It’s particularly important if your business deals with the general public, either on your own premises or elsewhere – for example, if you run a shop or visit people in their homes. 

What does public liability insurance cover?

Public liability insurance covers the cost of legal fees and any compensation awarded if someone makes a claim against your business due to an injury or damage to their property. This could be due to an incident on your business premises or the services you’ve provided.

For example, if a client visits your business, trips over and injures themselves, they might decide to sue your business. If you’re found at fault, you might need to pay damages. Public liability insurance covers these costs. 

Some policies also pay out for repairing or replacing damaged property or settling medical fees in the case of injury. Public liability policies can also cover situations in which your company supplies, makes or installs a product that damages property or harms people through sickness or injury. For example, if you run a catering business and the food you supply for an event gives people food poisoning.

Do I need public liability insurance coverage?

It’s not a legal requirement to have public liability insurance unless you run a horse-riding establishment. However, it’s important if your business interacts with customers, clients and the general public, even if only occasionally. 

Shop owners, tradespeople, restaurants and hairdressers typically buy public liability insurance, but that list is far from complete. You can find suitable cover regardless of your business type or size, with public liability insurance for the self-employed or small businesses both available. 

You might also need public liability insurance to belong to certain trade associations, and some clients may insist you have it before doing business with you. You usually need it for local government or council contracts. As a start up, you should be familiar with your legal requirements.

How much public liability insurance do I need?

It’s down to you to decide how much public liability insurance you need. You can typically choose cover worth £1 million, £2 million, £5 million or £10 million. These sums represent the maximum amount an insurer will pay out if you make a claim. 

To help you decide how much cover you require, you should think about the nature of your business and the likelihood of a claim. It’s important to choose enough cover, but also avoid taking out more cover than you need. That’s because the higher your level of cover, the more your premiums cost.

The following questions can help you determine how much cover to apply for:

• How often does your business come into contact with members of the public?

• What’s the likelihood of your work causing injury or damage to property? 

• How serious is any potential injury or damage likely to be?

• What’s the minimum level of public liability cover specified by a trade association to which you wish to belong?

• What level of public liability insurance are your clients insisting upon?

If you’re still not sure how much cover you need, talk to a broker or your preferred insurer.

How much does public liability insurance cost?

The cost of public liability insurance depends on a range of factors. These include:

• The type of business you have and what it does

• How many staff you have

• Your turnover

• Your insurance claims history

• The amount of cover you require

It’s important to shop around and compare quotes from a range of insurers to get the right level of cover at the best price. Doing so will also help you understand the many options business can get covered for.

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

If you don’t have public liability insurance and a member of the public injures themselves and successfully sues you, you or your business would need to pay the resulting legal fees and compensation. 

If you’re a limited company, your business is liable, but if you’re self-employed, you have to cover the costs out of your own pocket. Given these costs could run into hundreds of thousands or even millions of pounds, this could seriously damage your business or personal finances, and even result in bankruptcy. 

You can avoid all of this by having public liability insurance in place. Even if you never need to claim on your policy, you have peace of mind that you’re covered if something does go wrong.

You should also be aware that if you enter into an agreement with a client who requires you to have public liability insurance and you don’t have it, you’re in breach of contract. This could result in the client terminating the contract and claiming damages against you.