If you’re self-employed or run a business and are at all likely to meet the public, it’s advisable to get public liability insurance. As with all insurance, buying a policy is about making sure you have a safety net in place for something that might never happen, but could potentially ruin you and your business if it does.
It’s worth remembering that you may find yourself the subject of legal action by a member of the public even if you haven’t done anything wrong. We live in an increasingly litigious society and even if you’re cleared of any claims, you may be saddled with sizeable legal costs. Having the right insurance cover can help you manage those situations.
If you think you may need public liability insurance (PLI) here are seven questions you might be asking.
What is public liability insurance?
PLI is a form of business insurance that covers you and your company against legal action by a member of the public.
They may take this action if they are injured or their property is damaged, and they consider this to be your fault. Most commonly, they will make a compensation claim against your company. If they are successful, you may have to pay a financial sum decided by the courts, plus legal costs and damages. That might include medical treatment fees or the cost to repair/replace the property damaged. Your public liability insurance policy should cover you for all of these expenses – if you aren’t insured, you or your business will have to pay out.
Who needs public liability insurance?
You should consider getting public liability insurance if your business works with the public in any way. That includes enterprises where members of the public are regularly on the premises, such as shops, cafes, pubs and restaurants, and any form of business that involves working in public places or private homes. Examples include plumbers, electricians, building contractors and so on. If you meet members of the public during your work and there is a possibility they could be injured or have their property damaged, you should consider taking out public liability insurance.
You should consider getting public liability insurance if your business works with the public
Is public liability insurance a legal requirement?
PLI is not legally required for any business. The only insurance you have to have by law is employer liability insurance, and that is only if you employ one or more employees. However, PLI is required by many regulatory bodies and can be a requirement of a license to operate in some trades. Similarly, you may find that potential clients, including public bodies, will not contract the services of any business without PLI.
What about self-employed public liability insurance?
People who are self-employed are most in need of public liability insurance. If you are a sole trader, this should be the first form of business insurance on your list. If something goes wrong and a member of the public is hurt or has their property damaged because of your actions, you are the only one responsible. You don’t have a big company behind you, so legal costs, damages and compensation could easily wipe you out. Having PLI in place also assures your clients that you are a responsible trader who takes their responsibilities seriously.
What isn’t covered by public liability insurance?
As the name suggests, public liability insurance only covers you for legal action taken against you by members of the public. That means it doesn’t cover you for claims by your employers or clients. In those cases, you need employer’s liability insurance (a legal requirement, as mentioned above) and professional indemnity insurance respectively.
The latter policy covers you against action resulting from mistakes in your work and is recommended if you give professional advice or if your calculations could have serious consequences for a client. Businesses that should take out professional indemnity insurance include architects, accountants, engineers, teachers, journalists and consultants. Members of these trades may need public liability insurance as well, of course.
How much does public liability insurance cost?
The cost of PLI varies according to the nature of your business, how much you want to be insured for, and who supplies the cover. The larger and more successful your business, the more you will pay, as it is assumed that there will be more contact with the public and opportunity for mishaps to happen.
The level of risk involved in your business is also taken into consideration: for instance, do you work at height or with dangerous substances? You should also consider the amount of cover you need. £5-10m is standard, but if your line of business could leave you open to extremely expensive claims, you may want to be insured for more.
Of course, you should shop around to get the best deals or consider using an independent insurance broker who can put together a policy tailored to your precise needs.
How do I decide how much I should be covered for?
To establish how much cover you need, it’s advisable to undertake a thorough risk assessment. There may be minimum amounts required within your industry or by your clients. In some cases, it may be advisable to exceed these.
Remember: PLI is a tax-deductible business expense and can be bought on its own or as part of a general business insurance policy. When buying, be honest and transparent about the nature of your business and the risks involved. It may increase your premiums, but if you aren’t honest when applying, your policy may prove invalid if you need to claim on it.
Failure to have public liability insurance when you need it could seriously damage your business’ reputation as well as having a potentially damaging financial impact. You owe it to yourself to take out comprehensive public liability insurance so that you and those around you can enjoy peace of mind while working responsibly for and with the public.
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