What’s the difference between public liability and professional indemnity insurance?

Public liability and professional indemnity insurance protect you from compensation claims brought by others, but the similarities end there. Here, we explain how they differ.

Is there a difference between public liability insurance and professional indemnity insurance?

Public liability insurance and professional indemnity insurance are sometimes mistaken for one another or considered the same thing.

However, while both cover compensation claims, there are significant differences in the relationship between the policyholder and the claimant and in the nature of the claims each covers. 

What is public liability insurance?

Public liability insurance protects you from claims made by anyone who doesn’t work for you, including members of the public, suppliers, customers and clients. It covers accidents and incidents that lead to:

• Compensation claims for death or injury

• Compensation claims for property loss or damage

• Legal fees associated with such claims

Who needs public liability insurance?

Public liability insurance is suitable for any firm that faces the general public. While it’s still relevant for those working from home or online or those who rarely see their customers and clients, it’s a must for those who interact with them regularly.

This includes:

• Builders, plumbers, electricians, scaffolders and other trades

• Owners of shops, restaurants, pubs, beauty salons, gyms and sports centres

• Event organisers

Businesses sometimes need a minimum level of public liability insurance to work with local authorities and large companies.

Some trade bodies and associations also insist that their members have suitable levels of public liability cover. For instance, electricians must have £2 million of cover to join the Electrical Contractor’s Association. 

Public liability insurance policies usually protect policyholders against claims of between £1 million and £10 million.

What is professional indemnity insurance?

Professional indemnity insurance protects you from claims that clients and business associates may bring for losses incurred due to work-related errors. It typically covers:

• Negligence

• Loss of confidential or sensitive data or documents

• Plagiarism 

• Breach of confidentiality 

• Defamation – both libel and slander

• Legal fees arising from the claim

Who needs professional indemnity insurance?

This insurance is suitable for companies that provide a professional service or advice. Typical policyholders include:

• Accountants and bookkeepers

• Architects and design engineers

• Surveyors 

• Solicitors

• Financial advisers

• Some healthcare professionals

As with public liability insurance, corporate clients, regulators and other authorities often require businesses to have a minimum level of professional indemnity insurance. For example, architects must have at least £250,000 of cover.

Levels of cover are usually available with claims limits from £50,000 to £5 million.

Read more: How to claim on business insurance

How do public liability and professional indemnity insurance differ?

The main differences between these two types of business insurance are as follows. 

Public liability insurance

Public liability insurance tackles compensation claims for hardship and financial losses, including loss of earnings due to injury or the loss of or damage to an item of property.

The cause of the claim against you may be negligence – for instance, if the company failed to replace a manhole cover after a drain survey and someone fell in. It could also be a simple accident that costs your client money, such as an employee spilling a mug of tea on their laptop.

With public liability insurance, the legal claim could come from anyone (other than your staff) who suffers a loss due to your actions or failure to act.

Key points:

• Suitable for firms that work in a public setting

• Covers claims from clients, customers, suppliers and the general public

• Provides financial protection against compensation claims for personal injury, death and property loss

• Typical cover limits range from £1 million to £10 million

Professional indemnity insurance

Professional indemnity insurance covers claims for financial losses arising from an intellectual error. This could be negligence, such as someone in your company emailing sensitive client documents to the wrong recipient or a financial adviser offering inappropriate investment advice that results in significant losses.

With professional indemnity insurance, the claimant is usually a client, another tradesperson or project partner. For example, your error could hold up a building project, meaning other tradespeople can’t complete their work as scheduled, and the client can’t open its doors on time. 

Professional indemnity insurance only covers physical injury or property loss if someone sues the policyholder for causing it through negligent advice or some service-related failure. For example, an office ceiling collapses, injuring someone who then sues because the design engineer miscalculated the required ceiling beam calibre. 

An accident, such as someone slipping on a recently mopped office floor, wouldn’t be covered – that would be a public liability insurance matter.

Key points:

• Suitable for firms that offer advisory services to their clients

• Covers claims from clients rather than the public

• Provides financial protection against compensation claims for negligent services and poor advice

• Typical protection limit ranges from £50,000 to £5 million

Can I get public liability and professional indemnity insurance together?

Given the number of businesses that have contact with the public and offer some form of advice, it’s not surprising that you can buy both types of insurance together. 

Several insurers sell business policies for specific professions or trades that bundle together relevant policies. Depending on the profession, these may include both public liability and professional indemnity insurance, along with other policies, such as cyber cover or income protection insurance.

For example, policies designed for professions, such as photographers or architects, could include public liability, professional indemnity and employer’s liability insurance. 

Other providers offer policies that focus not on professions but on business structures. Self-employed business insurance is one example. It often brings together professional indemnity, public liability, employer’s liability and income protection insurance. 

It’s also worth speaking to an insurer directly if they don’t offer a bundle that suits your needs – they may be able to provide one for you, which could prove cheaper than buying each policy separately. 

Read more:

• What insurance does a small business need?

• Compare limited company insurance

Is it a legal requirement to have public liability and professional indemnity insurance?

It’s not a legal requirement to have professional indemnity insurance. The same goes for public liability insurance unless you run a horse-riding school. 

Although neither of these policies is required by law, falsely claiming to have the minimum level of cover needed to win a contract is fraud, which is unlawful.

You could also be in hot water if you successfully apply for and benefit from a trade body or association membership without meeting its insurance requirements.