What is public liability insurance

Kingsbridge insurance

What is Public Liability Insurance?

Navigating the world of business insurance can be daunting, but understanding the importance of public liability insurance is paramount for any entrepreneur. This comprehensive guide will not only help you grasp the fundamentals of what public liability insurance is, but will also empower you to make informed decisions that protect your business and secure its future.

Key takeaways

  • Public liability (PL) insurance provides financial security to businesses by covering legal fees and compensation pay-outs in the event of a claim. In simple terms, public liability cover protects you against claims made by members of the public who have suffered an injury or property damage due to your business activities.
  • While not a legal requirement, PL is strongly recommended for all types of businesses that have contact with the public, such as sole traders, SMEs and limited company contractors; the compensation costs from an accident can quickly add up, putting a financial strain on your business.
  • Comparing quotes from different providers can help you to find suitable coverage at an appropriate price for your business needs.

Understanding public liability insurance

Generally speaking, public liability insurance covers businesses against potential claims of personal injury or property damage by clients or the general public, safeguarding them by covering legal fees and compensation pay-outs.

Businesses that interact with the public in any capacity may find public liability insurance to be an indispensable safety net, as it offers financial security in the face of accidents or unforeseen difficulties.

Key components

The coverage provided by public liability insurance usually includes three main components: property damage, personal injury, and legal expenses.

Property damage refers to any harm caused to a client’s property, such as a tradesperson accidentally damaging a client’s home while working on site. Personal injury, on the other hand, encompasses any harm or suffering that a member of the public may experience as a result of your business activities, such as a customer slipping on a wet floor at your premises.

Public liability insurance protects businesses from the financial burden of defending against public claims, with legal expenses being a crucial aspect. These legal costs can quickly escalate and without adequate insurance cover, small businesses may struggle to afford the expenses related to compensation claims.

How it works

Public liability insurance operates by providing financial protection for businesses in the case of claims made by third parties due to business activities. For instance, if a customer were to trip over a loose cable at your business premises and suffer an injury, they could file a claim for compensation. If your business were found responsible, your public liability insurance would cover the legal costs and compensation payments that may arise.

Note that public liability insurance does not extend to employees; businesses require employers’ liability insurance for that purpose. Furthermore, while public liability insurance is not a legal requirement, it is widely recommended that many businesses, such as sole traders, limited company contractors, and SMEs take out cover to protect themselves from the financial consequences of third party claims.

Types of businesses that benefit from public liability insurance

Public liability insurance can be advantageous to a wide range of businesses that engage with the public, such as sole traders, limited company contractors, and SMEs. Typically, tradesmen, hairdressers, shop owners, and restaurant owners are among those who purchase public liability insurance to safeguard against potential claims, but it extends to many job titles and professions – even those that work remotely, like IT contractors.

Public liability insurance serves as a valuable tool for protecting your assets and reputation, irrespective of your industry, if your business deals with clients or the public in any way.

Sole traders

Public liability insurance is a valuable asset for sole traders across various industries and sectors. It provides a crucial layer of protection, giving clients confidence that they are dealing with a responsible and professional business owner.

Before entering into agreements, many clients may insist on sole traders having this coverage in place, seeing it as a commitment to safeguarding both parties’ interests. With public liability insurance, sole traders and partnerships can demonstrate their dedication to self-preservation, client safety, and the maintenance of a sterling reputation, ultimately enhancing their attractiveness to potential clients.

Small and medium enterprises (SMEs)

Small and medium-sized enterprises (SMEs), including retailers and service providers, can fortify their operations with public liability insurance. This coverage serves as a financial safety net against potential claims from customers or the public, offering a level of security that is invaluable in today’s business landscape.

Whether it’s a slip-and-fall incident in a bricks-and-mortar store or a customer’s injury due to a product malfunction, public liability insurance provides the necessary financial buffer for SMEs. By investing in this insurance, SMEs can conduct business with confidence, knowing that their enterprise is protected, and their professional image upheld, solidifying their position in the market.

Limited company contractors

Limited company contractors, often working in sectors like IT, engineering, and construction, can significantly benefit from public liability insurance. This form of coverage offers crucial protection against claims that may arise due to accidents, injuries, or damage to property during the course of their work. Clients in these industries often require contractors to have this insurance in place before engaging in contracts, as it demonstrates a commitment to professionalism and a willingness to take responsibility for any unforeseen events.

For limited company contractors, public liability insurance is not only a smart financial investment but also a strategic move to build and maintain a positive professional reputation. It instils confidence in clients, assuring them that they are partnering with a contractor who prioritizes safety, quality, and accountability in their service delivery. This can be a significant competitive advantage in a crowded market, ultimately leading to long-lasting client relationships and repeat business opportunities.


Freelancers operating across a wide range of industries can greatly benefit from securing public liability insurance. This form of coverage offers a crucial layer of protection against potential claims that may arise from their work. Moreover, many clients in today’s competitive market may insist on freelancers having this insurance in place, viewing it as a sign of professionalism and commitment to quality service delivery.

For freelancers, public liability insurance not only acts as a safety net but also demonstrates a strong sense of responsibility and care for both their clients and their own business reputation. This assurance allows freelancers to focus on their work with confidence, knowing that they have taken proactive steps to mitigate potential risks.

Legal requirements and industry standards

Public liability insurance, while not legally required, might be essential in certain contract engagement situations, including council contracts, trade associations, and client requirements. These entities may require businesses to have public liability insurance as a condition of membership or contract award, ensuring financial protection in case of claims.

Although not legally mandated, obtaining public liability insurance demonstrates a commitment to safeguarding your business and its reputation, making it an essential consideration for any responsible business owner.

Council contracts and trade associations

Council contracts and trade associations refer to agreements between a business and a local council or a trade association, which may necessitate businesses to possess public liability insurance as a condition of membership or contract award. For example, a construction company may be required to have a minimum cover of £5 million to £10 million in public liability insurance in order to be awarded a council contract for a construction project.

This requirement ensures that businesses have adequate financial protection in place in case of claims arising from their products, services, or activities. Businesses with public liability insurance showcase their dedication to responsible practices and enhance their prospects of acquiring profitable contracts and memberships.

Client requirements

Clients may require businesses to have public liability insurance before signing contracts, ensuring financial protection in case of claims. For example, tradespeople working on a client’s premises or retailers selling products at a craft fair may be required to provide proof of public liability insurance before being allowed to participate.

Businesses that secure public liability insurance illustrate their commitment to safeguarding clients and the public from potential risks associated with their offerings or activities. This not only helps to build trust with clients but also ensures that businesses are financially prepared to handle any claims that may arise.

Coverage limits and policy options

For your public liability insurance policy to provide adequate coverage, it is necessary to evaluate the specific risks your business might face and tailor your policy to suit those needs. This involves considering factors such as the level of interaction with the public, client types, and project sizes to determine the appropriate coverage limits and policy options.

Assessing business risks

Assessing business risks involves:

  • Evaluating the potential hazards and dangers in your business activities and premises
  • Identifying those who may be affected by these risks, including customers, employees, and members of the public who may be exposed to the hazards
  • Assessing the level of risk associated with each hazard by considering the probability of the hazard occurring and the potential severity of the consequences.

Maintaining a safe working environment and minimizing claim likelihood demand the implementation of precautions and safety measures to mitigate identified risks. Regular safety inspections, staff training, and providing safety equipment are just a few examples of measures that can be taken to reduce risks and ensure the continued relevance and effectiveness of your risk assessment.

Customizing your policy

Customizing your public liability insurance policy allows you to choose coverage limits and additional options that best suit your needs and industry requirements. For example, a construction company may require a higher coverage limit than a small retail store due to the increased risk of serious accidents occurring on a construction site.

As you tailor your policy, reviewing the policy exclusions is vital to ensure suitable coverage for any potential risks tied to your business activities. Additionally, consider any supplementary insurance considerations, such as employers’ liability insurance, to ensure that you have comprehensive coverage in place.

Additional insurance considerations

In addition to public liability insurance, businesses should consider other insurance policies to provide comprehensive protection. Employers’ liability insurance is required for businesses with employees, as it helps to cover employees in case of claims made due to workplace injuries or illnesses.

Employers’ liability insurance

Employers’ liability insurance is a legal requirement for businesses with employees, providing coverage for claims made by employees in relation to workplace injuries or illnesses. This type of insurance covers:

  • Medical expenses
  • Lost wages
  • Other costs associated with an employee’s injury or illness
  • Legal costs should an employee initiate legal proceedings against the employer.

Note that public liability insurance does not extend to employees; businesses require employers’ liability insurance for that purpose. By having both public liability insurance and employers’ liability insurance, businesses can ensure comprehensive protection against claims made by both the general public and their employees.

Personal accident insurance

Personal accident insurance is a valuable form of coverage that provides financial protection to individuals in the event of an accident resulting in injury, disability, or even death. This insurance typically covers medical expenses, lost income due to temporary or permanent disability, and, in tragic cases, provides a benefit to the policyholder’s beneficiaries.

It acts as a crucial safety net, offering peace of mind to individuals and their families during challenging times. It’s important to note that personal accident insurance is distinct from other forms of insurance, such as public liability or employers’ liability, as it is tailored specifically to the needs of the insured individual.

Directors’ and officers’ liability insurance

Directors’ and officers’ liability insurance is an essential safeguard for executives and board members of companies, protecting them from personal financial losses in the event of legal actions or allegations of wrongful acts in the course of their duties. This type of coverage can cover legal defence costs, settlements, and judgments. It plays a vital role in attracting and retaining top talent for leadership positions, as it provides a layer of protection against the personal risks associated with high-level decision-making.

It’s worth noting that this insurance is not a substitute for the company’s own liability insurance policies, but rather offers specific protection for individuals in leadership roles. Having both public liability and directors’ and officers’ liability insurance can provide comprehensive coverage for a business and its leadership team.

Obtaining public liability insurance

Obtaining public liability insurance involves the following steps:

  • Comparing quotes from different providers.
  • Choosing a provider that offers the coverage and pricing that best align with your business’s unique needs and requirements.
  • Managing your policy effectively to ensure you have the necessary coverage in place.

Researching and evaluating different providers and policies is crucial in finding the right business insurance for your company.