What Is Business Liability Insurance?
Business liability insurance protects not only your finances, but your employees, clients and customers too, in the event something goes wrong. Find out more about employers’ liability, public and product liability insurance with our guide below.
Injury, illness and loss or damage to property are all worst-case scenarios when it comes to your business activities. However, even in the safest of working environments, mistakes can happen and people may, unfortunately, get hurt.
This is why business liability insurance is so important. It not only protects you from the costs associated with a claim made against your business, but it also will help provide those who suffer a personal injury or damage to their property with the proper compensation.
This is the case whether you are a big business, a small company, a sole trader or self-employed.
There are three main types of business liability insurance dealing with injury and property loss or damage: employers’ liability insurance, public liability insurance, and product liability insurance.
Read on to find out the details of each policy, including what they cover and how much they cost.
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What is employers’ liability insurance?
Since the passing of the Employers’ Liability Act of 1969, it has been a legal requirement to take out an employers’ liability insurance policy the moment you hire just one employee. However, you may not have to take a policy out if you run a business that is not a limited company and where all the employees are family members – and you may not need it for employees working abroad.
The UK government dictates that this policy must cover you for at least £5 million and has to come from an authorised insurer. You risk a fine of £2,500 a day if you are not properly insured.
What does employers’ liability insurance cover?
If one of your employees were to suffer an injury or illness due to the work they do as part of their job, employers’ liability insurance would pay for the damages and compensation costs that the employee is entitled to as part of the claim made against your business, plus legal fees as a result of their claim.
And injuries don’t just occur in more dangerous workplaces such as construction sites. A loose cable in an office environment presents a trip hazard that could lead to an employers’ liability insurance claim being made.
There are a number of different forms of ‘employee’ a policy would cover, including:
- full-time employees
- part-time employees
- self-employed contractors under your hire
- any kind of temporary staff, such as interns, casual and seasonal workers
How much is employers’ liability insurance?
The cost of your employers’ liability insurance policy will, in large part, be informed by the number of employees at your business, as well as the industry you operate in.
The more employees, and the greater the risks associated with your sector, the more you can expect to pay.
To find the right employers’ liability policy, at the right cost and best level of coverage, you can use our comparison tool to get a quote.
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What is public liability insurance?
Of course, your employees are not the only ones at risk. Any business that regularly deals with clients in person, has visitors to its place of work or comes into contact with the general public should consider public liability insurance.
It covers the legal and compensation costs for personal injury, loss or damage to property, and even death, caused by your business activities to any person outside your employment.
Business public liability insurance examples
There are a range of industries that should look into public liability insurance, and some are more apparent than others.
For example, there are professions, such as plumbers and electricians, where the potential for injury or damage to property is clear. This could be due to a poorly installed pipe, which later bursts, or wires left loose that cause an electric shock.
However, there are less obvious situations, such as a beauty therapist using a product that causes an allergic reaction or a cricketer smashing a car window with a six, where public liability insurance is just as applicable.
How much does public liability insurance cost?
How much you pay for public liability insurance will depend on a number of factors. This includes the level of coverage you are seeking, both at a financial level, and whether you want to cover accidents at any off-site events as well as your business premises.
Other details that will affect your premium include the size of your business and its location, the risks specific to your industry, and any previous public liability claims.
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What is product liability insurance?
Selling goods of any kind, from cakes to carpets, can leave you in danger of being sued if an injury, illness or any form of property damage arises from your product. It doesn’t necessarily matter if you were the original manufacturer of the item and also applies to goods you give away for free.
Product liability insurance means your legal fees and compensation costs will be covered in the event of any of those outcomes.
So if you design, manufacture goods, import and distribute them, or are an online or offline retailer, you should take out product liability insurance. This is just as applicable to you if you make and then sell goods on an online marketplace such as Etsy as it is to larger stores and manufacturers.
What is covered under product liability insurance?
What your product liability insurance policy will include may vary depending on whether or not you are the manufacturer as well as the seller.
As standard, it should cover personal injuries and damage to property from faulty products. However, the policy likely will not cover you for bad workmanship, nor financial losses caused by your faulty product.
If you only distribute or sell the goods in question, you will need to prove the items were faulty when you received them, and that you provided customers with safety instructions for use.
How much does product liability insurance cost?
As with almost all forms of insurance, the cost of product liability insurance depends on a large number of variables.
This includes not only the level of coverage you wish to take out, but the types of products you make, where exactly you sell these products, and how much you sell them for.
» MORE: Do I need business insurance?
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Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more