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Most businesses involve some contact with the public – that could be clients, customers, visitors, or simply someone walking past your workplace. Even the safest of business activities, meanwhile, can carry with it a risk to a third party. Combine the two, and you have a potentially costly situation on your hands.
Public liability insurance is designed to protect against such an outcome. Read on below to find out what public liability insurance is, what it covers, and what happens if you don’t have it.
» MORE: Public liability insurance costs
Public liability insurance meaning
Public liability insurance is one of the most common policies found under the banner of business insurance, and is applicable to an array of different sectors and professions.
It provides financial protection if you injure a third party or they die, or their property is lost or damaged as a result of your regular business activities, and that third party (or their beneficiaries), then makes a claim against your business.
It is especially suited to businesses that:
- frequently have customers and visitors at their premises, such as shops and estate agents
- carry out work at client sites, such as plumbers and electricians
- work at events, fairs, markets, or any other public gathering
» MORE: Do I need public liability insurance?
What does public liability insurance cover?
As mentioned, public liability insurance is intended for claims made against your businesses relating to:
- an injury to a third party caused by your business activities
- damage to the property of a third party caused by your business activities
If a client, customer or member of the public were to make a claim against you, your public liability insurance should cover any legal fees and compensation costs, should the claim be successful, as long as you have the right level of protection.
For example, if you are a mobile hairdresser and drop a hot curling iron on your client’s carpet, public liability insurance should cover the compensation costs.
Similarly, if you are a builder or gardener, and someone walking by your work site trips over your materials and breaks their arm, your public liability policy should help with any compensation costs and legal fees.
It can even be of use in seemingly more benign settings. Offices still have hot cups of tea ready to scald a visitor’s lap, while your stall and materials at a local craft fair provide plenty of trip hazards for anyone curious about your wares.
» MORE: What does public liability insurance for events cover?
Does public liability insurance cover employees?
No. While public liability insurance will cover situations where a third party, such as a customer or visitor, is injured or has their property damaged, it does not stretch to your employees.
To make sure you can adequately compensate your employees if they fall ill or are injured during the course of their work for your business, you will need employers’ liability insurance.
In fact, it is a legal requirement that you take out an employers’ liability insurance policy worth at least £5 million from an authorised insurer if you have any UK-based employees that are not family members.
» MORE: Employers’ liability explained
What is not covered by public liability insurance?
Alongside your employees, public liability insurance won’t cover anything that happens to you, your business premise, your tools and equipment, or your stock. Essentially, if it doesn’t happen to a third party or their property, it isn’t captured by public liability insurance.
It also won’t be of use if a client makes a claim against you in relation to your advice or services, or accuses you of professional negligence. For that, you would need professional indemnity insurance.
» MORE: The cost of professional indemnity
What happens if I don’t have public liability insurance?
Unless your regulatory body or professional organisation requires you to take out a policy as a condition of its membership, or a client insists you have it before they agree to work with you, you won’t get into any trouble for not having public liability insurance.
However, you are leaving yourself exposed to paying 100% of a successful claim made against your business if something were to go wrong. You may regret not taking out a policy if you end up saddled with thousands of pounds in legal fees and compensation costs.
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