What’s the difference between public and employers’ liability insurance?

Public liability and employers’ liability are two different types of business insurance. One helps to cover the costs of claims made against your company by its employees. The other pays out on claims made by third parties or members of the public.

What’s the difference between public and employers’ liability insurance?

Public liability insurance and employers’ liability insurance both cover your business in the event of a claim against it. The type of cover you need depends on who is making the claim. 

For example, if one of your employees claims compensation due to an injury, employers’ liability insurance should help to cover the related costs. 

The same is true if an ex-employee makes a compensation claim, even if they only worked for you on a temporary or part-time basis.

On the other hand, if someone who doesn’t work for your company sues you for causing an injury or damaging their property, public liability insurance can help foot the resulting legal costs and any payout.

Claims that public liability insurance covers include those from:

• Clients

• Suppliers

• Customers

• Passers-by

Professional indemnity insurance is another type of business insurance you may need to protect you from compensation claims and associated legal costs. Professional indemnity is different from public liability and employers’ liability insurance.

Read more:

• What is professional indemnity insurance?

• Differences between public and professional indemnity insurance

Do I need public and employers’ liability insurance?

Employers’ liability insurance is a legal requirement for most companies with employees, but there are a few exceptions (see below). Employers’ liability is a legal requirement to avoid employees being left out of pocket because a company can’t afford to pay their injury or illness claim.

On the other hand, public liability insurance is not a legal requirement for most types of businesses. However, it is a valuable safeguard in case a member of the public ever makes a claim against your company.

Examples of situations in which public liability insurance could help include:

• A client visits your business premises, trips and suffers life-changing injuries

• A passer-by trips over debris from a construction site you’re working on and ends up with head injuries

• A customer slips on a wet floor in your shop and breaks a valuable watch they’re wearing

Cover of this kind is particularly important for businesses that deal regularly with members of the public. However, even if you’re a self-employed sole trader who has minimal interaction with the public, you may find certain clients will only work with you if you have a minimum level of public liability insurance in place. 

You can find out more about insurance for self-employed workers on our dedicated self-employed insurance page.

Are you legally required to have both employers’ liability and public liability cover?

If you have employees, UK law states that you must have employers’ liability insurance providing at least £5 million in cover. Failure to do so can result in fines of up to £2,500 per day.

This rule also applies to businesses that employ:

• Temporary workers

• Part-time workers

• Freelancers

• Unpaid volunteers

• Students

• Trainees

There are, however, a few circumstances in which you may not need to buy employers’ liability insurance for your business, even if you have employees. 

According to the Health and Safety Employers’ Liability Act, the main ones are:

• You are the sole employee of your limited company and own more than 50% of its shares

• You only employ close relatives

How much employers’ liability insurance do I need?

You need employers’ liability insurance cover of at least £5 million to comply with the law, but some policies offer a larger amount – say £10 million – as standard. 

How much public liability insurance do I need?

Most public liability insurance policies offer cover of between £1 million and £10 million. How much you need depends on the nature of your business. 

In some cases, your clients set the amount of cover you need. For example, government agencies and local authorities typically only work with suppliers with at least £5 million in public liability cover.

Can you get public liability and employers’ liability insurance together?

Yes, you can often buy employers’ liability and public liability insurance together from the same insurer. The overall cost of such bundled  policies depends on a range of factors, including:

• The industry you work in

• The number of employees you have

• The level of your annual turnover

• The location of your business

• How much cover you need