What is public liability insurance?

Public liability insurance is one of the types of insurance you should consider taking out to protect your business, but whether you need it depends on the nature of your work. 

If you come into contact with members of the public through your business, either on your own premises or elsewhere – for example, if you run a shop, visit people in their homes to provide services or carry out work in public places – public liability insurance is essential. 

If you injure a member of the public or damage their property without such insurance, you could face a bill for thousands of pounds in legal costs and compensation claims, seriously impacting your company's finances.

Public liability insurance isn’t the only type of business insurance worth considering. Depending on your operation, you may also need to think about others, including professional indemnity insurance and goods in transit insurance. 

Find out about other types of business insurance

What does public liability insurance cover?

Public liability insurance covers the cost of legal fees and any compensation awarded If a member of the public sues your company for injury or damage to property. This type of cover can also pay for repairing or replacing damaged property or settling medical fees in the case of injury. 

In some cases, public liability insurance can also cover situations where a product supplied, made or installed by your company causes harm to people (through sickness or injury) or property – for example, if you run a catering business and the food you supply for an event gives people food poisoning.

In addition, it covers incidents involving third parties, such as your suppliers, customers or other members of the public who come into contact with your business as a result of your work. It doesn’t cover your employees, though. You need employers’ liability insurance to insure against loss if an employee is injured or made ill through work.

Find out how to claim on your business insurance 

How much public liability insurance do I need?

You can usually opt to have £1m, £2m, £5m or £10m of public liability cover. This is the maximum amount your insurer will pay out in the event of a claim. How much you need depends on the nature of your business. The higher the level of cover you choose, the higher the premium will be, so it’s worth thinking carefully about how much cover you need so you don’t pay more than necessary. 

Factors to consider include:

• How often you come into contact with members of the public in the course of your business

• The likelihood that your work could cause injury or damage to property

• How serious any potential injury or damage could be

• The minimum level of public liability cover specified by a trade association to which you belong

• The level of public liability insurance your clients insist upon

The cost of your insurance policy will also depend on your specific circumstances, such as the type of business you have, the number of staff, your turnover and where you work. 

In addition, prices vary between providers because they have different: 

• Ways of assessing risk

• Levels of risk they’re prepared to take on

• Types of businesses they cater for

This means that it’s worth shopping around for cover. 

Business insurance is an allowable expense for tax purposes, enabling you to deduct the cost of your public liability insurance when you calculate your taxable profit.

Get a quote for public liability insurance to see how much a policy would cost you

Is public liability insurance required by law?

Unlike employers’ liability insurance, which is a legal requirement for any business with employees that aren’t close family members, public liability insurance isn’t required by law unless you run a horse-riding establishment. However, you may need it to belong to certain trade associations, and some clients might insist you have it before doing business with you. You’ll usually need it for local government or council contracts.

What happens if I don’t have public liability insurance?

Suppose a member of the public who has been injured or had their property damaged due to your work sues you, and you don’t have public liability insurance. In that case, you’ll have to pay all the legal fees and compensation if their claim is successful or you admit liability. If you run a limited company, your business would have to pay these costs, while you would be personally responsible for them if you’re self-employed.

These costs could run into hundreds of thousands or even millions of pounds, so having to pay them yourself could seriously damage your business’s finances or even bankrupt it. 

Even if you never have a claim brought against you, it is still risky not to take out public liability insurance if your business comes into contact with members of the public because the potential costs involved are huge. Having this insurance gives you peace of mind that your business is protected. 

Another issue is that you’d be in breach of contract if you entered into a legal agreement with a client who required you to have public liability insurance if you didn’t have it. In this situation, the client could terminate the contract or claim damages against you.

Insurance to consider in addition to public liability insurance

You can take out a range of other types of business insurance to protect your business in addition to public liability cover. These include:

• Professional indemnity insurance – this covers you if a client makes a claim against you for a financial loss caused by following your advice or using your services

• Goods in transit insurance – this pays out if goods you’re transporting are lost, stolen or damaged 

• Business interruption insurance – this protects your business if you have to stop trading due to an unexpected event, such as your premises being damaged by fire or equipment failures, causing you to lose income