Finance

Does My Business Need Public Liability Insurance?

Allison S Robinson | 4 February 2022 | 2 years ago

Does my business need Public Liability insurance?

Public Liability insurance is your safety net for protecting you against litigation from a customer or a member of the public, who is not a customer, for various claims, including injury caused to themselves and damage to their property or assets.

What size and type of company should buy Public Liability insurance?

Public Liability insurance will cover businesses of all shapes, sizes and ages. Here is a brief overview:

Start-ups – When you launch a new business, you generally want to be very financially savvy. If a client becomes sick or injured due to your product or your business’s actions (or non-action), you will be in a vulnerable position. Avoid a premature shutdown with insurance.

Small businesses – As a small business, you will still have people (the public, customers and non-customers) entering your business premises. Your Public Liability insurance will protect a small business against claims due to accidents on your premises, e.g. the classic ‘slip and trip’ claim.

Sole traders – As a sole trader, you may have the type of business that requires you to have in-person dealings with clients. Up-to-date Public Liability insurance will ensure that your personal assets are not threatened by injury or property damage claims.

Limited companies – A limited company is most definitely responsible for its clients relating to negligence. Public Liability insurance will protect your bottom line in the case of negligence claims, even if such a claim is against your employees.

Public Liability insurance definition

Public Liability is one of the first insurances taken out by companies. In summary, it protects you from litigation relating to your business and employees’ responsibilities to clients and the public.

Regardless of the business model, any business is recommended to have this insurance in place, especially for sole traders, as the latter business model exposes you to greater personal risk. Accidents happen ‒ that is part of life. However, accidents, injury, asset damage or personal injury that happen when linked to your business will be covered by Public Liability insurance.

There’s a sub-section of Public Liability insurance that is called Products Liability. This would be helpful protection if your business reconditions products or puts them into new packaging before selling them onwards.

Public Liability insurance can also be extended to include Employer’s Liability insurance.

What is excluded from Public Liability cover?

Public Liability is insurance for businesses and thus does not cover your personal property or injuries you have personally incurred. The cover is explicitly for covering third parties.

Even if you have chosen the business model of “sole trader”, are self-employed, or are a freelancer, this insurance will not cover you personally. You must seek out an additional policy for Personal Accident Insurance.

In addition, your personal loss is not covered. For example, destruction, theft or loss of your personal tools, personal purchases in storage at home or away from your property, and other personal assets (like furniture) are not covered by Public or Product Liability cover. You can ask for it to be added, but it is not an automatic inclusion.

What is the cost of Public Liability Insurance?

A Public Liability insurance policy must be customised to your business’s needs. You will need to submit information such as:

  • Type of products sold
  • Number of employees
  • Geographic location of the business
  • Trading hours

Other insurances for businesses

Public Liability is not the only insurance you should research and purchase. The variety and degree of business insurance you should acquire will be subject to various factors, for example:

  • The type of business
  • The location of the business
  • The assets held by the company
  • The annual turnover
  • The number of employees

Employers Liability insurance

From the first moment you hire an employee, you are legally required to acquire Employees Liability insurance. This can be added as a sub-section to a Public Liability policy.

Even if your business model is “sole trader”, you will require Employer’s Liability cover if you hire an employee, regardless of their work category.

The staff of your company are your, and the company’s, responsibility. If employees incur loss, damage or injury, they have the legal right to claim against your insurance. Your cover will pay for legal costs and the claim amount.

NOTE: Should there be any hint of bullying an employee into not claiming, there are serious legal ramifications attached to this.

Company Vehicle Insurance

If your company relies on vehicles, vans or lorries to operate, they must have appropriate insurance cover. The loss of income due to damaged business-critical vehicles will easily cost you more than an insurance policy.

Commercial Property Insurance

If your business owns the property that it operates out of, or earns income from one, then it should be covered as well as its fixtures. Some properties, like fuel depots, have to insure a radius of properties around them as well.

Professional Indemnity insurance

This is an important insurance to have in your portfolio if you give advice or certify things, e.g. an architect or engineer.

You are covered if your advice or instruction has caused loss or damages to a client.

NOTE: You are not covered for doing a poor job or substandard workmanship. If you follow current published standards and something fails, then you are covered.

Product Liability insurance 

If the product you manufacture, have installed, maintained or served (e.g. food) makes a person ill or causes damage to them or their property, this insurance covers you. If you are a repairman, you should consider Professional Indemnity and Product Liability cover.

Cyber Security insurance 

This is a growing field of insurance, and the number of security breaches and legal responsibilities continues to grow. If customer data passes through your business portal or server or you have an online business, you need this insurance. It covers damage from cyber-attacks or security breaches that result in data being stolen.

If you are an FSB* member, note that your membership includes Cyber Security insurance.

As cyber-attacks are becoming more sophisticated, it would be prudent to research increasing or supplementing your FSB cyber cover.

Note: *The FSB is the Federation of Small Businesses. It is based in the UK and is a business organisation. Its members are self-employed or small and medium-sized businesses. It is managed and operated by its own members and is a not-for-profit organisation. 

Does a home-based business need insurance?

A home-based business will need to be declared to your home insurer as that changes the home’s usage. It is necessary to get separate cover for business assets and operations. It is also advisable that you consider, if relevant, Professional Indemnity, Product Liability, and Company Vehicle insurance. If you have employees, then you are obliged to take out Employer Liability insurance.

Do different businesses need different insurance?

Short answer: Yes. An accounting business, for example, will have different cover to a refrigerated trucking company or a baker.

Tradesperson insurance needs

There are a variety of trades, and therefore you would have to be detailed in your work description to your insurance broker. For example, you’ll indicate that you work:

  • With electricity
  • With high heat, e.g. an ironmonger
  • At extreme heights, e.g. corporate building maintenance
  • Underwater, e.g. oil rig diver
  • With underwater welding
  • As a rig driver over long distances
  • As a pilot
You can see the vast difference in risks that an underwriter would have to consider for each of these businesses, and the cover would have to be carefully tailored around these. If your business model relies on subcontractors, you must inspect their insurance policies (or ask your broker to review them) and make sure they are correctly covered. This is your responsibility as your company is the principal contractor.

Freelancer and contractor insurance needs

Do you freelance on film sets? Are you contracted to do work by other companies? Don’t mistakenly think that someone else’s insurance covers you. Part-time or full-time, you need cover. Have you checked the PI limits in the contract you are signing with the organisation that is hiring you? Talk to your broker.

Are there more insurances to research?

In theory, the answer is yes, but this is subject to so many factors. An important step is to talk to a broker and be open and frank about the type of business you do. Talk them through examples of projects from A to Z and discuss challenges that you face. While they listen, they will pick up on risks that you thought were just “hassles” that you had to live with, e.g. they might propose Debtor insurance. Here are some other examples of risk:

HMRC Tax Audit

Every business is submitting tax assessments and, whether it is filled out by you personally or an accountant, errors may occur, or something could raise a flag unwittingly in HMRC. When that notification arrives in your mailbox (virtual or physical), you are in for a long slog. An audit will devour your time and/or your employees’ time, and things like customer service, logistics and even sales might be negatively affected. You will most likely incur unexpected costs from the process.

If you are a Federation member, you will enjoy their tax audit protection. This is capped at GBP100K and is available to you if your membership fees are up to date. You are also given valuable support and advice from top tax experts.

Conclusion

Whether you have a small or large business or are a one-man band, it is key to your success and survival to discuss your business risks with an insurance broker and get the most appropriate Public Liability insurance for your business needs. Without it, you could be scuppered at the starting gates.

Topic

Finance

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