Many small businesses mistakenly believe that public liability insurance is a costly, unnecessary expense. This misconception can be detrimental to an SME in the event of a claim against it. Public liability insurance for small businesses covers the costs associated with third-party claims for property damage or bodily harm. Therefore, this article aims to provide small business owners with essential information about public liability coverage.
Unlike employers’ liability insurance, which is the only mandatory policy for small businesses in the UK, businesses are not required by law to have a public liability coverage. While this may sound like a relief for the small businesses working with a limited budget, the losses that may arise from liability claims make it one of the crucial policies that every business owner should have.
Public Liability Insurance (PLI) protects your business financially from claims made by the public (customers, suppliers, visitors, passersby) for injuries, illness, or property damage caused by your business activities. It covers legal expenses and compensation payments for incidents occurring on the business premises or as a result of its activities.
Consider a small catering business: if a client were to slip and fall while at an event catered by the business, public liability insurance would cover any legal costs and compensation if the client sues for damages. Similarly, for a cleaning company, if a cleaning product damages a client’s property during a service, the insurance would cover the repair or replacement expenses. If a customer slips and falls at a craft fair hosted by the business, public liability insurance would cover legal fees and compensation in case of a lawsuit. Likewise, if a vendor accidentally damages property belonging to the craft fair venue, the insurance would fund repair or replacement costs. Furthermore, for a freelance photographer, if equipment accidentally injures a client during a photoshoot, public liability insurance would handle any resulting legal claims.
In the construction industry, if a contractor’s work leads to property damage or bodily injury, public liability insurance would cover associated costs. For a small retail store, if a customer trips over merchandise and is injured, the insurance would provide financial protection against resulting claims. In the healthcare sector, if a patient suffers harm due to a medical procedure, public liability insurance would help cover legal and compensation expenses.
Misconceptions about public liability insurance for small businesses often arise due to misunderstandings about its cost, coverage, necessity, and flexibility. Some believe that insurance is expensive, fearing that a single claim could result in significant financial burden. However, insurance operates on the principle of spreading risk across many businesses, making it affordable for firms of all sizes. Moreover, policies vary, allowing businesses to compare and select affordable options tailored to their needs.
Another misconception is that the policy covers all financial losses, which isn’t necessarily true. While it may cover damages or injuries to third parties, it typically doesn’t cover purely financial losses. For example, if a service delay causes a client financial loss but no property damage or bodily harm, the insurance may not apply. Additionally, some believe that public liability insurance is only necessary for manual occupations like construction, overlooking the fact that businesses across sectors can face liability claims from third parties. Even seemingly low-risk businesses like IT firms can be vulnerable to claims from incidents like tripping accidents.
There’s also a misconception that a new policy is needed for each new contract, which isn’t accurate. Typically, a single policy can cover all business activities, and insurers often allow policy modifications as businesses grow. Only in cases of highly complex or high-risk projects might a new policy be necessary. Understanding these misconceptions is essential for small business owners to make informed decisions about their insurance needs.
Small businesses should consider purchasing a public liability insurance, especially if they fall under the following categories:
- You have a physical business office that the public visits
- Your firm hosts or organizes events and other activities
- You operate from home and allow clients to come over
- You work in an area where the public can access. This includes a client’s site or the street
- You intend to open a store within a craft fair or market
Some small business owners believe that having a professional indemnity policy eliminates the need for public liability insurance. This misconception can be costly, as both types of insurance serve different purposes.
Public liability insurance protects your business from claims arising from third-party injuries or property damage caused by your business activities. For example, if a customer slips and falls on your premises, public liability insurance would cover their medical bills and any legal costs incurred.
Professional indemnity insurance, on the other hand, protects your business from claims made by clients for professional negligence or errors in your work. This could include things like missed deadlines, inadequate service, or financial losses resulting from your actions.
A public liability policy will cover the legal, administrative, and compensation costs in the event of the following claims:
- Property damage: The cover will come in handy if you or your employees damage someone else’s property.
- Bodily harm: If a member of the public, who is not your worker, presents a claim against your business for an injury sustained within your business, the policy will be applicable.
- Violation of a third party’s intellectual property rights or harm through advertising: Someone may present a claim against you if you make an advert that defames them or if you infringe their intellectual property rights.
- Reputational damage: It is possible for a business rival to sue you for allegedly publicizing an advert or interview that negatively affected their business. In such a situation, the public liability policy will cover the incurred costs.
- Damage to your firm’s property: The public liability insurance only covers damage to a third party’s property. To protect your own property, you need to purchase a commercial property insurance.
- Injury to a worker: To cater for the resultant costs, you will need to have a worker’s compensation policy.
- Mistakes made when delivering your services: A public liability insurance has different features from a professional indemnity policy. As such, the latter insurance is needed to cover errors made in the course of your work.
To save money, many small businesses in the UK search for affordable small business liability insurance. However, finding the cheapest public liability insurance can be hard because prices depend on many factors.
The table below provides a starting point for your search, outlining several providers and their starting prices. Remember, these are indicative figures, and the best option for you depends on your specific needs and risk profile.
|Starting from £4.94
|A wide range of small businesses, including shops, offices, and professionals.
|Starting from £3.14
|Tradespeople, contractors, and other businesses with employees.
|Starting from £3.19
|Home-based businesses, sole traders, freelancers, high-risk businesses such as scaffolding, roofing, and welding.
|Starting from £4.75
|High-risk businesses, professional services, and creative industries.
|Starting from £4.99
|Retail businesses, restaurants, and manufacturing companies.
|Starting from £3.49
|Start-ups, small shops, pubs, restaurants, and micro businesses.
|Starting from £2.95
|Specialist insurance for sports businesses. Gyms, sports coaches, and outdoor activity providers.
A highly effective method we recommend for discovering affordable public liability insurance for small businesses is to engage with an insurance broker. By sharing details about your business, they can offer tailored recommendations for the most suitable provider. Just keep in mind, using brokers might take longer and require more paperwork.
In certain situations or industries, you may not require costly yearly insurance. For instance, if you participate in the art and craft market and attend craft fairs occasionally, you can consider one-day craft fair insurance. CraftCover and Event Insurance Services are providers offering affordable public liability insurance for craft fairs.
Public liability insurance is an essential financial safeguard for small businesses operating in the UK. While not a legal requirement, it offers invaluable protection against the potentially devastating consequences of a liability claim. A single incident of property damage, bodily injury, or reputational harm caused to a third party can lead to significant financial losses that could cripple a small business. Public liability insurance provides peace of mind by covering the costs of compensation and legal fees associated with such claims, allowing businesses to focus on their core operations and minimize financial risk.
However, it’s crucial to remember that the coverage only applies to claims involving third parties. It does not extend to damage to the business owner’s property, injuries sustained by employees, or professional errors. Therefore, it’s important to consider additional insurance options to ensure comprehensive protection for your business.