Do I need public liability insurance?
Public liability insurance is designed to cover the legal costs and compensation payments your business could be liable to pay if a member of the public - be that a customer, supplier or general passerby - sues your company following an injury or damage to third party property sustained during your business activities.
Although it is one of the most common types of business insurance, knowing exactly what public liability insurance is and, more importantly, if your business is required to have it or not is not always clear. With this in mind, here at Markel Direct, we have put together this handy guide. From looking into which businesses need public liability insurance most to exploring the reasons why this type of cover can be so important, this blog should tell you everything you need to know about this form of insurance.
Who needs public liability insurance?
In the UK, public liability insurance is not a legal requirement for any business. Indeed, the only type of business insurance that is mandatory under UK law is employers’ liability insurance.
However, many freelancers and small businesses are required to hold public liability insurance as a contractual requirement – so you may find that your client won’t let you start work until you’ve proven you have arranged public liability insurance.
If your business has physical premises, such as a store, office or factory, and customers, clients and/or suppliers visit on a regular basis, investing in public liability insurance is a sensible choice. After all, if this is the case, you should think about just how much your business could be impacted and financially damaged in the event of a third party being injured or their property being damaged in the course of your business, rather than whether or not having this type of cover is a legal requirement. Remember, in some instances, if you are not covered, a large legal case brought against your company could be enough to put you out of business.
Which businesses need public liability insurance?
As discussed above, while no business is legally required to take out public liability insurance in the UK, certain types of businesses need it more than others. As a rule of thumb, your business should consider purchasing public liability insurance if it works with the general public and has direct contact with them on a regular basis. This could include businesses that invite customers onto specific business premises, such as shops, cafes, pubs or restaurants, for example. However, it also includes freelancers, contractors and small businesses that interact with clients, suppliers, sales reps and other third party, regardless of location.
Examples of freelance professionals that may need public liability insurance include:
- business consultants
- IT contractors
- engineering contractors
- dance teachers
- personal trainers
- many more.
Businesses that should seriously consider taking out public liability insurance include:
- retailers with physical customer-facing premises
- manufacturers that regularly have customers, clients or suppliers on site
- hairdressers, barbers and beauty salons
- caterers with physical premises
- licensed pubs
- agencies whose offices are regularly visited by clients, including marketing consultants, digital search agencies, advertising agencies and graphic design agencies.
To put it in basic terms, if there is any chance at all that a member of the public or athird party could be injured or have their personal property damaged at your workplace or while you are working on their premises, you should have public liability insurance in place.
Why do I need public liability insurance?
Having public liability insurance could be the difference between your company staying in business or not, should a third party bring a successful legal claim against you.
The consequences of being uninsured if a claim is brought against you could be catastrophic. For example, say you operate your business from an office and a client slips on a wet floor and breaks their hip while visiting, or you’re a self-employed IT contractor and you spill a cup of coffee on a client-owned laptop - if you are uninsured and the injured party decides to sue your business, you will be expected to pay for a solicitor to defend you in court. Additionally, if the claim against your business is successful, you may well be forced to pay a hefty compensation settlement and possibly cover the legal fees of the person who is suing you.
It’s also worth noting that, even if your defence is successful, you are likely to still be faced with substantial legal fees that have accumulated throughout the case. While these can sometimes be reclaimed from the third party who brought the claim against you, it is unlikely you will be repaid in full.
If your business is covered by public liability insurance, however, your insurance provider will typically cover the associated costs of a claim being brought against your company. This will generally include compensation payouts, court fees and other legal expenses. With this in mind, having this protection in place really could be the difference between you staying in business or being bankrupted by compensation payouts and legal fees.
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