FreelanceInsure's Guide: What is Public Liability Insurance?

Public liability insurances cover a business for claims made for loss or damages by a third party, whether they suffered a loss or are injured by you or your someone in your company,  either on your own premises or at a customer's site.

It therefore covers against accidents and injuries suffered by members of the public, as well as against damage to any property caused by you or your employees in the course of normal business operation. If you work from home, it will cover clients and representatives visiting you there too.
However, it is designed to cover you only against third party claims.

Covering settlement of a claim

As well as covering settlement of a claim, public liability insurance also provides for legal fees and costs. Recent changes in the law (April 2012) means that the NHS is now allowed to make a claim when a personal injury compensation is made. Under the Injury Cost Recovery Scheme, the NHS can reclaim the cost of treating injured patients in all cases where a personal injury compensation is paid.

In many professions public liability insurance is not a legal requirement, however, without it the risk to any business can be high.  Whenever you go into a client's homes, there is always a chance you may cause damage or may leave something that someone may fall over. Depending on the extent of the damage, and whether the claimant is a high-earner and/or has dependants, you can be sued for hundreds of thousands of pounds.

Claims in such cases have been awarded for life-long care, plus lost income, and resulted in companies and individuals going out of business and being bankrupt. In 2012, the UK insurance industry paid out an average of £9.2 million every day in liability settlements. Many businesses see public liability insurance as the barest minimum of cover they need.

If you are a business that offers goods or services to third parties, either to the public, or to other businesses, then you are likely to need public liability insurance, especially if you are a small enterprise, or are self-employed.

The professional groups who take public liability insurance routinely include general builders and carpenters, joiners, electricians (and electrical contractors) as well as plasterers, painters and decorators, and gardeners. Other professions include people who work from home such as accountants, business consultants, independent social workers, private physiotherapists, beauticians etc.

Public liability insurance is, generally, a low-cost cover, with premiums as modest as £10 a month. Premiums do vary, however, depending on the type of business you run, the level of cover you want, and the level of ‘excess’ you opt for.  For example FI's excess is not optional and is fixed, other insurance policies may have different criteria.

Minimum cover is usually £1 million, with small enterprises opting for a £2 million to £5 million lever. Some contractors working the government or for local authorities may be required to have at least £10 million.

All employers (with more than one employee) are obligated under the law to take out an employers' liability compulsory insurance (EL) (see the Employer's Liability (Compulsory Insurance) Act 1969) to protect themselves and their business against damages and legal fees should an employee be injured as a result of working for that business. EL insurance is required to have cover for at least £5 million.

Most insurance policies however provide a base level cover of up to £10 million.  It is used to insure against claims for the most frequent accidents suffered by employees, for example trips and falls, back or spine damage from lifting heavy objects, or severing a digit or limb when using equipment. The employer’s policy must be with an authorised insurer listed by Financial Services Authority (FSA). You can check the FSA register online or you can phone the FSA helpline direct on 0845 606 1234. An Employer's Liability (Compulsory Insurance) Act Guide for Employers is available from the Health and Safety Executive (HSE).