Public liability insurance for small businesses explained

Most small companies come into contact with the general public, even if this isn’t part of their core work. Unfortunately, rubbing shoulders with others can lead to accidents, which could result in a legal claim.

In this guide, we look at how public liability insurance can protect you and your business from a costly legal claim brought by a third party.  

What is public liability insurance?

Public liability insurance protects businesses against compensation claims and associated legal fees brought by anyone else who doesn’t work for you. It covers claims for personal injury, death and damage to property stemming from an accident at your place of work. 

In this case, your place of work doesn’t just mean your business premises. Incidents in public areas are also covered if they relate to your work. For example, a roofer could drop a tile on a parked car, or a member of the public could trip over a hose you’re using to clean office windows and twist their ankle.

Likewise, public liability could even cover you if you were on your way to a meeting and put your bag down in a train aisle, causing someone to trip and injure themselves. 

Interestingly, this type of business insurance also covers damage or injury caused by a failure to act. For instance, a plumber who forgets to turn off newly fitted taps after reconnecting the mains, thereby flooding the kitchen.

Do I need public liability insurance?

Although public liability insurance isn’t a legal requirement – unless you run a horse-riding school – it may still be a good idea to purchase it – especially if your firm works in an environment where there’s the potential for accidents involving the public. 

The professions and trades that should consider public liability insurance include:

• Shops or market stalls

• Trade businesses, including builders, plumbers and electricians

• Restaurants, pubs, B&Bs

• Courier services and removal firms

• Hairdressers

• Vehicle repair garages

• Tree surgeons and gardeners

• House clearers

• Window cleaners or gutter clearance service provider

Who else could benefit from public liability insurance?

Any firm that crosses paths with the public, customers and service providers, such as couriers, may benefit from public liability insurance.

So, if any of the following ring a bell, public liability could be relevant for you:

• You work from home, where you sometimes meet clients (even if only occasionally)

• You visit customers’ homes for work purposes, such as to provide quotes for jobs

• You take delivery of goods from delivery services at home or your work premises

• You employ staff to do leaflet drops, pick up supplies or drop off purchased goods 

• You organise external events that involve participants or spectators

Other reasons to get public liability insurance

For some small businesses, public liability insurance is not only to protect their company but also to open doors. For example:

• Local government authorities and councils typically won’t work with you without a specified minimum level of cover

• Many large companies, particularly those in the construction industry, may require you to have a minimum level of protection

• Certain trade organisations won’t let you join unless you have public liability insurance 

How much public liability insurance do I need?

The amount of public liability insurance you need depends on the risks associated with your work.

If you run a building firm, the risk to the public, passers-by and property is greater than if you own a hair salon. The latter may need £1 million in cover, while the former may need far more due to the nature of their work and the bodies that employ them. 

For example, local authorities and councils invariably require any company working for them to have between £5 million and £10 million in protection. 

A minimum level of cover can also be a joining criterion of various trade bodies. For instance, the Electrical Contractor’s Association stipulates applicants must have at least £2 million in cover.

How much does public liability insurance cost?

You can expect to pay from around £5 a month, rising to more than 10 times this amount, depending on the following factors:

Exactly how much you pay for public liability insurance depends on several factors, including: 

• The nature of your work – certain professions are riskier than others, such as construction and some services

• The number of people you employ – the more staff you have, the greater the chance of someone causing an accident

• Your business structure – whether you are a sole trader, in a partnership or a limited company

• Your annual turnover – high turnovers suggest to insurers that you are busy and have lots of clients, which may increase the risk of a claim 

• Your business address and where you work – there are more hazards in busy towns or cities than in small, quiet towns and villages

• Your claims history – if you’ve claimed in the past, insurers consider you a greater risk than someone who’s never claimed

• How much voluntary excess you agree to pay – this is the sum you contribute towards the claim before the insurer steps in

Read more:

• See what business public liability insurance would cost you 

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

What doesn’t public liability insurance cover?

Public liability insurance protects you against most, but not all third-party claims relating to death, injury or loss of property.

Exclusions include claims arising from malicious or reckless acts, such as if a builder tosses a broken brick over their shoulder and hits someone. Likewise, policies don’t cover criminal acts, such as fraud or theft. 

Other potential claims that fall beyond the scope of public liability insurance include: 

• Staff injury or death, or property loss

• Loss of life, injury, or property loss suffered by you or your partners

• Company property loss or damage

• Financial loss caused by poor or negligent professional advice or services

What other business insurance should I consider?

Public liability insurance is just one of several types of  business insurance that you should consider. Here are some of the others:

• Employers’ liability insurance – a legal requirement if you employ anyone, even for a one-off job, who isn’t a member of your immediate family

• Professional indemnity insurance – covers claims made against your company for poor advice or sub-standard work that causes the client to suffer financial or reputational loss

• Van insurance – motor insurance for vans and other vehicles that you use for work purposes