What is public liability insurance?

Public liability insurance covers the cost of compensating someone outside your business who is injured, or whose property is damaged, because of something your business did. It pays the damages and the legal costs. It is not a legal requirement for most UK businesses, unlike employers’ liability insurance which is is compulsory, carries a minimum of £5 million and a fine of £2,500 for every day you trade without it. These two types of insurance are different policies covering two different groups of people, and having one does not automatically provide you with the other.

The practical case for public liability has little to do with the law. Rather, it is the fact that a single injury claim can run to six figures, that you can be liable without having done anything obviously careless, and that a claim can arrive years after the event, all of which drives businesses to ensure they have sufficient cover.

This guide covers what the policy pays for, what it refuses, how much cover to buy, what it costs and why, and the timing rule that decides which of your old policies answers a claim.

What public liability insurance covers

The policy provides cover when a third party suffers bodily injury or property damage in connection with your business, and you are legally liable for it. Third party means someone who is neither you nor your employee: a customer, a supplier, a passer-by, a neighbouring business, a member of the public.

It pays two things: the compensation awarded or agreed, and the legal costs of defending the claim, including the claimant’s costs if you lose. In practice the second often matters more than the first, because defending a claim you eventually win still costs money.

Typical situations:

What happens	Who claims
A customer slips on a wet floor in your shop and breaks a wrist	The customer
A tradesperson drills through a pipe in a client’s house and floods the kitchen	The client
A ladder falls from your scaffold onto a parked car	The car’s owner
A delivery driver trips over a cable in your reception	The driver, or their employer’s insurer
A café’s table blows over in the wind and injures a passer-by	The passer-by

 

Liability is the key factor. The policy pays only where you are legally responsible, so a genuine accident with nobody at fault is not covered, and neither is an injury caused entirely by the claimant. But the threshold for being at fault is lower than most business owners assume. Failing to grit an icy entrance, leaving a trailing cable, or not putting out a wet floor sign can often be enough for a valid claim.

What a claim looks like in practice

Three types of incident account for most public liability claims, and they are worth recognising because none of them involves obvious carelessness.

Injury from something on your premises. A customer sits down at a restaurant table and traps a finger between the seat padding and the metal frame, severing the nail. Nobody was negligent in any dramatic sense. The furniture had a pinch point, the business supplied it, and the injury happened on its premises.

Damage caused by your work at someone else’s property. An installer fits a new boiler, a fitting fails, and water damages the property instead of heating it. The claim is not for the faulty fitting or for redoing the job, which is a matter between the installer and their supplier. It is for the damage to the customer’s home.

Damage caused by an accident while working. A roofer replacing a roof light puts a foot through the plasterboard and wrecks the room below. This is the clearest example of why tradespeople working in occupied properties buy higher limits than their turnover alone would suggest.

The second and third cases also show where the policy stops. It pays for the damage to the client’s property. It does not pay to put right the defective work itself, and it does not cover the contractor’s own tools, materials or vehicle.

Is public liability insurance a legal requirement?

No, not for businesses generally. The Health and Safety Executive states the position plainly: public liability “covers you for claims made against you by members of the public or other businesses, but not for claims by employees”, and “while public liability insurance is generally voluntary, employers’ liability insurance is compulsory”.

There are three ways it can nonetheless become mandatory for you specifically.

The insurance that actually is compulsory

Employers’ liability. Under the Employers’ Liability (Compulsory Insurance) Act 1969, you must hold it from the moment you become an employer, for a minimum of £5 million. The penalty is £2,500 for every day you are not properly insured, plus £1,000 for failing to display the certificate where employees can see it.

Two exemptions matter to small businesses. A family business is exempt where all its employees are closely related to the owner, though not if the business is incorporated. And a limited company is exempt where its only employee is also the owner of 50% or more of the issued share capital, which covers most one-person companies.

Motor insurance. Section 143 of the Road Traffic Act 1988 requires insurance for any vehicle used on a road or other public place. Business use needs a commercial policy; public liability will not respond to a road traffic accident.

Where a licence requires it

A handful of licensed activities carry a genuine legal requirement for third-party injury cover.

Hiring out horses is the clearest. In England, Schedule 5 of the Animal Welfare (Licensing of Activities Involving Animals) (England) Regulations 2018 makes it a mandatory licence condition to hold public liability insurance covering injury to and death of clients, and the certificate must be “clearly and prominently displayed on the premises”. In Wales the equivalent sits in section 2 of the Riding Establishments Act 1970.

Keeping a dangerous wild animal requires insurance against damage caused by the animal, under section 1(6) of the Dangerous Wild Animals Act 1976.

Beyond those, requirements come from individual councils rather than from statute, under general powers to attach conditions to a licence. Street trading is the common example: Camden, for instance, requires £5 million of public liability cover before trading begins. Private hire operators are frequently required to hold it where members of the public visit the operating centre.

Two points worth correcting, because both are widely asserted:

• Animal boarding and dog day care carry no statutory insurance requirement. Neither the 2018 Regulations nor Defra’s statutory guidance for kennels, catteries or day care mentions insurance at all. Individual councils may impose a condition; check yours rather than assuming.
• Scrap metal dealers carry none either. The Scrap Metal Dealers Act 2013 contains no insurance requirement, and councils’ power to attach conditions under it is narrowly limited to trading hours and metal retention.

Where a contract requires it

This is how most businesses actually end up buying it. Public liability is a standard condition of commercial contracts, and refusing to hold it usually means not winning the work. The figures are contractual, not legal, and they are covered below.

Public liability, employers’ liability and professional indemnity

These three policies cover three different groups of people. Confusing them can be an expensive mistake because a business can hold the wrong one and believe it is covered.

	Public liability	Employers’ liability	Professional indemnity
Who is protected	Members of the public, clients, other businesses	Your employees	Clients who lose money
What triggers it	Injury or property damage	Injury or illness at work	Negligent advice, design or professional service
Compulsory?	No, except specific licences	Yes, minimum £5m	Only for regulated professions
Typical claimants	A customer who trips	A warehouse worker who is hurt	A client who acted on bad advice
Policy basis	Claims occurring	Claims occurring	Claims made

 

The dividing line between public liability and professional indemnity is financial loss. Public liability handles physical consequences: a body or a thing is damaged. Professional indemnity handles economic ones: nobody is hurt and nothing is broken, but a client lost money because of your advice. An architect whose design is wrong causes financial loss, which is professional indemnity. An architect who knocks a laptop off a client’s desk causes property damage, which is public liability.

Regulated professions must hold professional indemnity as a condition of practice, including solicitors, accountants, architects, surveyors and financial advisers.

What public liability insurance does not cover

Wordings vary, so read your own public liability policy. The following exclusions appear in effectively every UK policy.

Excluded	Why, and what covers it instead
Injury to your own employees	Employers’ liability
Damage to your own property	Commercial property or contents insurance
Property in your care, custody or control	Usually excluded, with carve-outs for employees’ and visitors’ property and for premises you are working at but do not own
Advice or design supplied for a fee	Professional indemnity
Anything arising from a vehicle, aircraft or watercraft you own or use	Commercial motor insurance
Contractual liability you have taken on beyond your ordinary legal liability	Nothing. Read indemnity clauses before signing
The cost of recalling or replacing your own faulty product	Product recall insurance, a separate cover
Pollution other than a sudden, identifiable, unintended incident	Environmental impairment liability
Fines, penalties and punitive damages	Nothing. These are not insurable
Asbestos, war, terrorism and radioactive contamination	Specialist cover where it exists at all

 

Most policies also exclude deliberate or reckless acts, though this is not universal and depends on the wording.

Two things often described as exclusions are not, and the distinction matters because it changes what you must do rather than what you are covered for. Working at height is normally handled as an underwriting restriction: the policy states a maximum height you have declared, and work above it is outside what you were rated for. Hot works such as welding, soldering or using a blowtorch are normally handled by a policy condition requiring a permit, fire extinguishers to hand and a cooling-off period before leaving site. Breach of a condition can lose you the claim entirely, which is a worse outcome than an exclusion, because you will not see it coming.

How much cover do you need?

There is no legal minimum for public liability. The £5 million figure people quote is the statutory minimum for employers’ liability, and it has migrated into the public liability conversation by association.

Cover is sold in rungs of £1 million, £2 million, £5 million and £10 million. That is market practice rather than a rule, and where a figure is required of you it will come from a contract or a licence.

Who is asking	What they typically require	Nature
Central government, via Crown Commercial Service frameworks	£5m public and products liability, maintained for at least six years after completion	Contractual
Local authority contracts	£5m as a general position, with guidance warning against a blanket approach and allowing lower cover where proportionate	Contractual
Street trading licences	£5m is common	Licence condition
NHS supply of services	£5m baseline, rising to £10m only where the NHS body selects the higher option	Contractual
Construction under CDM 2015	Nothing. CDM imposes no insurance requirement at all. Levels come from the building contract	Neither

 

When no contract or licence sets the figure, you are choosing it yourself. The right question is what the worst claim against you could plausibly cost, not what a typical one costs, because insurance exists for the rare bad outcome rather than the common small one.

The worst realistic claim against a bookkeeper working from home is modest. The worst against someone working in occupied homes, in crowded public places, above ground level or near expensive equipment is not, because a single serious injury claim carrying ongoing care costs can exhaust £1 million on its own. The step from £1 million to £2 million usually costs very little, because the premium is driven mainly by the likelihood of a claim rather than by the size of the limit.

One technical point that catches people out: the public liability limit applies per occurrence, so it resets for each separate incident. Product liability limits are usually in the aggregate, meaning the figure is the total for the whole policy year across all claims.

What it costs, and what drives the price

Prices vary by trade more than by anything else, so a single average is close to meaningless. As a guide, Simply Business reported that 10% of sole traders paid £64.37 or less annually between 1 January and 30 June 2026. That is a figure for the lowest-risk end of the market, not a typical price, and the businesses included in that price bracket are people are small businesses like nail technicians and small consultancies.

What actually moves the premium:

• Your trade. The dominant factor. A roofer and a bookkeeper are not in the same market.
• Turnover and headcount, as proxies for how much exposure you generate.
• Where you work. Occupied domestic properties, public places and client sites cost more than your own premises.
• Working height, declared and rated.
• Claims history, over the past three to five years.
• The limit and the excess. Raising the excess reduces the premium, and is worth doing only if you could actually pay it.

Two things to watch when comparing quotes. Paying monthly is usually a credit agreement with interest, so the annual figure and the twelve monthly payments are rarely the same number. And a cheap quote built on an understated turnover, headcount or working height is not cheap, because the insurer can reduce or decline the claim when the real figures emerge.

Why the policy that pays is the one you held at the time

Public liability is written on a claims occurring basis. The policy that responds is the one in force when the injury or damage happened, not the one in force when the claim arrives. If someone is hurt in your shop in 2026 and sues in 2031, your 2026 policy answers the claim, even though it expired years earlier and even if you have since changed insurer or stopped trading.

Professional indemnity works the opposite way, on a claims made basis. It covers claims brought against you during the policy year, whenever the underlying mistake occurred. That is why professional indemnity needs run-off cover when a business closes, and public liability generally does not.

Three practical consequences:

Keep your old policy documents indefinitely. They are the evidence of who was on risk in a given year. This is the single cheapest thing on this page and the one most often skipped.

Never leave a gap in cover. An uninsured month is a permanent hole. Anything that happens in it is uninsured forever, and no future policy will reach back to fill it.

Tell your insurer about an incident even if nobody has claimed. Notification duties bite at the point you become aware something might give rise to a claim, not at the point a letter arrives.

How long a claim can arrive

Under the Limitation Act 1980, a personal injury claim must normally be brought within three years, and a property damage claim within six years. Both have extensions that matter more than the headline figures.

For personal injury, the three years runs from the injury or from the claimant’s date of knowledge, if later: the date they first knew the injury was significant and attributable to what you did. For a condition that develops slowly, that can be long after the exposure. The court also has a discretion under section 33 to allow a late claim where it would be equitable.

For property damage caused by negligence, latent damage provisions allow three years from the date of knowledge, subject to a 15-year longstop from the negligent act.

The longest exposure is children. Time does not run while a claimant is under 18. A child injured on your premises has until their 21st birthday to bring a personal injury claim, and until their 24th for an ordinary six-year tort claim. A toddler hurt in your shop today could sue you in 2044. Any business whose customers bring children with them should understand this before deciding that a cheap policy and a good memory will do.

If you stop trading

Because public liability is claims occurring, the policies you held while trading continue to answer claims about the years they covered. You do not normally need to buy run-off cover.

If a company is dissolved, a claimant can still reach its insurer directly under section 1 of the Third Parties (Rights against Insurers) Act 2010, which transfers the insured’s rights against the insurer to the third party. Keeping the policy records available is what makes that work.

Product liability

Product liability covers injury or property damage caused by a product your business supplied, rather than by something you did. It is almost always sold combined with public liability, which is why policies are usually headed “public and products liability”.

It is not confined to manufacturers. Liability can attach where your name is on the product, where you repaired, refurbished or altered it, where you imported it from outside the UK, or where the manufacturer cannot be identified or has ceased to exist. A retailer importing goods directly carries the liability of a manufacturer.

The cover is for the harm the product causes, not for the cost of recalling, repairing or replacing the product itself, which is product recall insurance. And the limit is normally an aggregate for the policy year rather than per occurrence.

Frequently asked questions

Is public liability insurance a legal requirement in the UK?

No, not for businesses in general. Employers’ liability insurance is compulsory once you have employees, at a minimum of £5 million. Public liability is required only for a small number of licensed activities, such as hiring out horses, and by contracts and local licence conditions.

What is the difference between public liability and employers’ liability?

Who is protected. Public liability covers claims by members of the public, customers and other businesses. Employers’ liability covers claims by your own employees. Employees are specifically excluded from public liability policies, so holding one does not meet the legal requirement for the other.

Do I need public liability insurance if I work from home?

Only if third parties come to your home for business reasons, or you visit theirs. Clients, deliveries and tradespeople attending your home for your business are not covered by household insurance, which generally excludes business use. If you never see anyone face to face, the exposure is low.

How much public liability cover do I need?

There is no legal minimum. £1 million is the entry point, £2 million is common, and £5 million is the usual figure required by public sector and local authority contracts. Choose on the worst realistic claim rather than the average one, and note that moving up a rung is usually inexpensive because the premium is driven mainly by the chance of a claim.

Does public liability insurance cover my employees?

No. Injury to employees is excluded and is covered by employers’ liability insurance, which is compulsory. Self-employed subcontractors may fall under either policy depending on the wording and how they actually work, so check rather than assume.

How long after an accident can someone claim against me?

Normally three years for personal injury and six for property damage, but both can run longer. The personal injury clock can start from the date the claimant realised what had happened rather than the date it happened, and for a claimant who was a child at the time it does not start until their 18th birthday, giving them until they are 21.

If I cancel my policy, am I covered for things that happened while I had it?

Yes. Public liability is written on a claims occurring basis, so the policy in force when the injury or damage happened is the one that responds, however long afterwards the claim arrives. Keep the paperwork, because you may need to prove which insurer was on risk.

Is product liability included?

Usually. Most policies are sold as public and products liability. The product cover pays for harm the product causes, not for recalling or replacing the product itself, and its limit is normally an annual aggregate rather than per claim.

Need information about the other types of business insurance? See our business insurance overview.