Do UK contractors need to hold public liability insurance?
If you are new to contracting, you’re probably still trying to fathom which insurances you actually need and which are more of a nice-to-have. The chances are you’ve heard of public liability insurance but perhaps don’t know exactly what it’s for or if it’s an insurance that you absolutely have to have. This article sets out to demystify public liability so that you know exactly what you need and why.
Let’s begin with what public liability insurance actually is and what it covers.
In short, public liability protects your business against claims from members of the public for injury and/or property damage. It’s applicable if you undertake your business in the same spaces as other members of the public, whether they are a client’s employees, other contractors, or people wholly unrelated to you and your work. If a third-party is in some way injured or their property is damaged as a result of your business activities, you could be held responsible and, therefore liable for compensation pay-outs. Public liability insurance protects you by covering damages, compensation or legal fees arising from a claim.
As an example, say you are an IT contractor carrying out a project at a client’s office. While there, you accidentally knock over some specialist equipment belonging to them and break it. Your public liability insurance would cover the cost of replacing it.
Is public liability insurance a legal requirement for contractors?
Public liability insurance is not a legal requirement for the self-employed. However, it can be a contractual requirement, and usually is. In those cases, it is mandatory for you to hold it if you agree to the terms of the contract and you would be in breach of contract if you did not.
Do contractors need to hold public liability insurance?
As mentioned above, public liability insurance may be specified in your contract. If it is, then not holding it would put you in breach of contract. Quite often, recruiters or end clients will want to see confirmation of insurance as part of the documentation you supply when beginning a contract. Clients and/or recruiters will also usually specify an amount that the cover should be worth as well.
But public liability cover should not just be a box-ticking exercise to ensure you are meeting the terms of your contract. You need to ask yourself if you could afford it if a claim were successfully brought against your business. Using the above example of replacing specialist equipment, depending on the industry your client works in, this cost could run into the tens or hundreds of thousands. To pay for that you would potentially have to sell assets or use savings. Public liability cover, however, would pay it for you.
What level of public liability cover does my limited company need?
This depends on several factors, such as personal circumstances, industry and so on. Kingsbridge offers various levels, with the standard being £5 million any one claim (unlimited in the aggregate) but rising up to £10 million if that’s the cover level you need. Of course, often clients and recruiters will specify a level of cover they need you to hold, so you may need to change this if you don’t hold enough for a particular engagement.
What is the excess for public liability insurance?
The excess on any insurance needs to be affordable to you or else the insurance is rendered worthless. However, the level of excess largely depends on the insurer. Some insurers offer an excess of only a few hundred pounds, whereas others run into the thousands. This is worth considering. For instance, if the excess on your public liability insurance is £5,000, that means you need to be able to find and pay that £5,000 in the event of a claim. And if the claim is for less than £5,000, then you won’t be able to use your insurance at all.
Kingsbridge, for reference, has nil excess for public liability and professional indemnity on most policies as standard, meaning you can make a claim in any circumstance.
Make sure you’re happy with your quote
Before you buy public liability insurance for your limited company, get quotes and make sure you’re satisfied you’re getting the best deal. Kingsbridge offers public liability cover as part of its Insurance for Contractors package. The package of insurance includes as standard:
- Public liability – £5 million any one claim (unlimited in the aggregate);
- Professional indemnity – £1 million any one claim (unlimited in the aggregate);
- Employers’ liability – £10 million any one claim (unlimited in the aggregate);
- Directors’ and officers’ liability – £100,000 any one claim (and in the aggregate);
- Occupational personal accident – weekly benefit of up to £500 payable for up to 52 weeks, and personal accident, death and disablement cover up to £100,000.