Is public liability insurance compulsory?

For example, some trade associations won’t allow you to register with them unless you have public liability (PL) cover in place. And, in many industries, it’s likely clients will require you to have this type of insurance before working with you.

In this guide, we explain all you need to know.

Who needs public liability insurance?

Public liability insurance covers the legal and compensation costs that may arise if:

• A member of the public is injured because of your business activities.
• You accidentally damage a member of the public’s property while carrying out your business activities.

These types of claims can come in all shapes and sizes. For example, a garden landscaper could accidentally damage their client’s property while working. Or, a customer could slip on an unmarked spillage in a restaurant and injure themselves. In both cases, the affected member of the public could decide to sue the business owner. Public liability insurance is designed to cover the costs that would arise from such a claim.

With this in mind, any business owner, contractor, or freelancer who interacts with the public in any way should consider protecting themselves with public liability insurance. Remember – members of the public include customers, suppliers, contractors, and general passers-by.

If you’re uncertain if you do need public liability insurance or not, find out more in our guide: Do I Need Public Liability Insurance?

Do you have to have public liability insurance?

There are some scenarios where you may have to have public liability insurance to get work as a business owner, contractor or freelancer. This is because some clients may want the reassurance of knowing you're protected just in case anything were to go wrong. Say, if there was a chance you could accidentally damage a very expensive piece of their property – they’d want to know you were financially able to foot the cost for this.

Many business owners would struggle to afford the costs that could arise from a public liability claim – whether due to property damage or injury. An injury claim, for example, could run into the tens if not hundreds of thousands. So, much like you need to have at least third-party insurance to drive, some clients want to know a business is insured before working with them. Some examples of these scenarios include:

• A self-employed gardener is required to provide proof of public liability insurance in order to secure a contract from the local council to carry out maintenance of public spaces.
• A building contractor is required by a major client to have PL cover before starting construction works.
• A DJ is required by a wedding venue to have public liability cover in order to perform at the venue.
• A subcontractor is required by the main contractor to take out their own public liability insurance before starting work.

It’s worth noting that, if a client contract stipulates you need to have public liability insurance and you don’t get this type of cover – you’d be in breach of contract. You could therefore end up losing the contract and even facing a claim.

You may also need to have public liability insurance to sign up to certain trade associations and membership programmes. For example, the popular tradespeople directory, Checkatrade requires all of its members to have PL cover.

How much public liability insurance do I need?

Public liability insurance policies usually start from £1 million worth of cover – going up to £5 million. At Markel Direct, our public liability insurance starts from £5 per month*.

The reason insurers design their policies to cover such a large amount is that public liability claims can end up being substantial. For example, if someone suffered a serious bodily injury or disease because of a tradesperson’s poor practice, they could seek compensation for ongoing medical expenses, the loss of ability to work, and legal fees.

The good news is – you can usually get a large amount of cover for a relatively small monthly payment.

When working out how much cover you need, think about:

• How much you’re required to have by clients and trade associations – they will usually stipulate a minimum amount of cover.
• The likelihood of your business causing a serious injury or even death – the construction industry would be considered higher risk, for example.

As policies usually start at £1 million – you can rest assured that you’re getting a good amount of cover, even by opting for the minimum. However, you may want to consider increasing your cover if you’re concerned about what you’d do if you were to face a very serious claim. It’s worth noting, too, that the more insurance you take out, the less you generally pay per every pound insured. For example, there may only be a few pounds difference between £1 million of cover and £2 million of cover.

Deciding if you need public liability insurance

While public liability insurance isn’t compulsory by law, it’s an invaluable form of protection to have for many businesses. You’ll soon realise if you need to have this type of cover in place to work with certain clients, as they’ll make this clear during your initial conversations.

But, ultimately, when it comes to knowing how to choose the right insurance policy – it’s most important to think of what you’d do if you were to face claim. Any business that regularly interacts with customers, the general public, suppliers, and contractors could find themselves in this situation – which could end up costing a huge amount of money.

For a relatively low monthly or annual cost, public liability insurance gives you the peace of mind that your business is protected if something goes wrong. 

*Based on an IT contractor requiring a £1 million level of cover.