Public liability insurance is needed if a business had contact with any third parties as part of its work. It protects a business if it’s held accountable because a third party is injured, has property damaged, or is wrongfully arrested. A third party could be in the form of a customer, passer-by, supplier, vendor, or other people who come onto the business premises or place where work is carried out.

No matter how diligent a business may be, accidents can happen to anyone, and a business could be held liable. The latest figures show there are more than 72,000 public liability claims in the UK each year, and payments in 2019/20 amounted to £6.64 million, according to the Government’s Compensation Recovery Unit. Insurance covers the cost of these compensation claims, plus the legal costs that go with fighting or settling them. Even if a business has done nothing wrong, it will still need to fund solicitors to defend it.

Businesses that have exposure to the public must consider public liability insurance. Industries that are wise to consider public liability insurance include:

  • Builders
  • Plumbers
  • Electricians
  • Other tradespeople
  • Hairdressers
  • Beauty salons
  • Pubs/bars/nightclubs
  • Restaurants/cafes/other caterers
  • Charities
  • Events
  • Dentists
  • Window cleaners
  • Masseuse
  • Painter/decorators

A business may be required to hold public liability insurance to be a trade body or regulatory body member. For example, the Association of Plumbing and Heating Contractors Limited (APHC) requires public liability insurance with a minimum of £2 million of coverage for companies engaged in plumbing, heating and mechanical services. This is on top of employer’s liability insurance and professional indemnity insurance. The Electrical Contractors’ Association (ECA) also requires a minimum cover of £2 million in public liability insurance.

Public liability insurance costs about £118 a year for a typical small business wanting £2 million covers, according to research in the public liability insurance guide by NimbleFins. However, the premium varies depending on the risk factor of the line of work, the size of the business, location, maximum cover required, the number of employees and other factors. Small businesses generally take out cover between £1 million to £5 million, but sometimes a client or industry body will require a certain minimum.

Public liability insurance: what is it?

Public liability insurance is the financial protection against compensation claims from third parties for bodily injury, damage to property, or wrongful arrest, along with the legal costs that come with them.

It is not required by law but is one of the most popular types of business insurance because sometimes a company cannot stop an accident from happening, no matter how cautious they are.

The insurance will cover a business’s legal bills and a successful claimant’s medical bills, compensation payments, and repair costs.

A third party may be a customer, passer-by, supplier, vendor, or other contractors hired by the business, such as a cleaner or landlord.

It does not cover a business owner, its employees, work experience staff or students. Employers’ liability insurance is needed for this. Employers’ liability insurance is a legal requirement of any UK business, while public liability is not.

Is public liability insurance a legal requirement?

According to the Association of British Insurers (ABI), public liability insurance is not a legal requirement for horse riding businesses, according to the Association of British Insurers (ABI). However, it can be a term as part of membership to a trade body, regulatory body, or as terms of a contract with a client, no matter how small. A business owner hiring a builder to construct an extension may wish to see proof of public liability insurance before agreeing to hire them. Or a family may wish to know a caterer has cover for a 500-person wedding reception.

Do I need public liability insurance for my business?

If a business has exposure to the public in any capacity, it is wise to consider public liability insurance. This could be due to customers or other third parties making regular visits to the business premises, or if the business is carried out off-site around members of the public, for example, events or activities.  Those with the most contact with the public are most at risk of a public liability claim. These include pubs, restaurants, cafes, shops and tradespeople.

Public liability insurance may also be required by an industry body a business is affiliated with. As explained above, electricians and plumbers must have coverage up to £2 million to be a member of their respective bodies. According to the Association of British Insurers (ABI), horse riding businesses are also legally required to have public liability insurance, according to the Association of British Insurers (ABI).

Remember, this insurance does not protect a business from injury or property damage to its employees. Employers’ liability insurance is needed for this and is required by law.

It also does not cover a business’s own property and contents. This would be covered under commercial property insurance. Bad design and advice due to negligence or accident are protected under professional liability insurance. Crimes, intentional damage and defective products are also not protected by public liability insurance.

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