Do I Need Public Liability Insurance for My Business?
Public liability insurance is an essential policy for small businesses, and it’s one of the most popular types of business insurance out there. According to NimbleFins, public liability insurance is needed to defend a business if it’s blamed for accidental personal injury or property damage arising out of your work.
This insurance is all about covering the legal fees and compensation associated with lawsuits. For example, if a client visits your office and trips over or a product you manufacture has a defect causing damage, your insurance underwriter could step in to cover the fees if you’re sued.
But with so much information and so many options out there, it’s easy to get confused. To help, this article will explain how to know if you need public liability insurance for your business, as well as where to buy it and how much it will cost you.
What businesses need public liability insurance?
All small businesses which deal with third parties need public liability insurance. That’s whether your employees come into contact with any third party or you’re involved in the supply chain of a product.
A third party includes customers, clients or anyone in the supply chain your business interacts with. Regardless of business type – whether you’re a sole trader, partnership, limited company or charity – if you deal with the public, then you’re at risk.
If the worst happens and you’re sued, lawsuits are very expensive to defend. With compensation claims, medical bills, legal fees and more, this could amount to tens of thousands of pounds.
Especially for small businesses, it’s unlikely you have the resources to fight a claim. Without it, your business is at risk, and you could even go out of business. However, with liability insurance, your costs would be covered, and you can operate as usual.
If your business meets any of the following conditions, then it’s an essential policy:
- You’re home-based and have clients visit your home office
- Your business has business premises, like an office which clients visit
- Your premises are open to the general public
- Your work involves meeting the third party
- You host events
- You run market stalls or stands
Whether you also manufacture, design, supply, or retail a product, you still need it. Policies that cover injury or damage caused by products are called product liability insurance. Although it’s almost always wrapped up together with a public liability policy, be sure to check with individual providers.
While public or product liability insurance isn’t a legal requirement, you could face other scenarios where you need it. Some clients or trade organisations may require it if you’re going to work with them; for instance, a concert venue may require a caterer to have public liability insurance.
How to get liability insurance for a small business
There are two main ways to get liability insurance for a small business. The first is via an insurance broker, who is an intermediary between you and multiple insurance providers. They represent you as a customer to find the right insurance policies at the best price.
You may have heard of insurance agents, but these aren’t the same. The big difference is agents work for a particular insurance company, and they’re essentially salespeople who sell their company’s products whether or not it’s the best option and price.
Freelance insurance brokers will use their expertise to help you find the right coverage. To do this, they may ask lots of questions to get to know you and your requirements. Then by scanning the market, brokers will try to find the best coverage from a range of different providers.
The other quicker way to get insurance is comparing policies yourself using a comparison site. There are lots of options out there, and they’re useful to help you find the best price at different levels of cover. They’re also free to use, so there’s no harm seeing what’s out there.
However, as a word of caution, comparison sites sometimes aren’t best if you have a complicated situation. If so, it may be worth a follow-up call with a broker or agent to discuss your specific requirements.
Small business public liability insurance quotes
When you start gathering and comparing quotes, the price you get back from brokers, agents or comparison sites can vary. This is due to the risk that you pose to the insurer. Your turnover, claims history, the number of directors, excess, and the amount of coverage needed can all impact the quotes.
NimbleFins found the average cost of public liability insurance in the UK is £118 per year, assuming £2m of coverage. But this can range from less than £50 to over £450 per year depending on the risk a business poses.
An important factor is your work line, as some professions carry a greater risk of third-party injury or property damage than others. For example, a domestic cleaner could pay as little as £52 per year; meanwhile, a builder could pay over £226.
Your business structure can also be a big factor. Sole traders can end up paying around £65 annually, which increases to an average of £89 for partnerships and £188 for limited companies with two registered directors.
Once you’ve decided on a policy and provider before you buy, it’s worth double-checking if the insurer is qualified to offer insurance. To do this, you should check the Financial Services Register, which the Financial Conduct Authority maintains. After all, the last thing you want is to be caught out.