Do I Need Public Liability Insurance?

What is public liability insurance?

This form of insurance covers your company, or yourself as a sole-trader, if a member of the public or a client suffers personal injury or property damage because of something your business did or did not do.

It does not apply to your employees; they are (or should be!) covered by employers liability insurance.

It covers:

- Legal costs;
- Compensation payments.

→ Limit liability: form your own limited company

- Read more: Limited Company Vs Self Employed

Who needs it?

Technically, any company that does business with the public.

These would be:

- High street shops, cafes, restaurants;
- Tradesmen (builders, plumbers, electricians etc.).

What would it cover?

- Financial payouts decided by the courts;
- Legal fees;
- Damages (medical fees, goods repair/replacement costs).

If someone sues you because of the work you did or the goods you sold them and they win the case, what do you do? It may bankrupt you if you have to pay out of your own pocket.

Britain is, once again, traipsing after American legal culture. Compensation claims have become much more common and, crucially, much more socially acceptable. If a householder trips and falls on flagstones you laid, they are much more likely to try it on in the courts than to exhibit a 'stiff upper lip' and blame their own carelessness.

Note: public liability insurance is not compulsory. You are not legally obliged to have it. The only form of insurance you are legally obliged to have is employers' liability insurance, if your business has long-term, direct employees.

However, some entities you deal with, like public bodies, may insist you have it before they employ you. Likewise, licensing in some trades requires you to have this cover. Clients may also ask for evidence of cover, and to a particular level, before they’ll trade with you

How much would I be covered for?

- £1m, if all your clients are private and your niche is relatively 'safe';
- £5 to £10m would be the norm, if you take on government contracts.

Businesses with greater risks attached would require more.

The ultimate decider is: how likely is it that someone will sue me because of the product or service that I provide?

Someone writing code at home doesn't really need it. Someone regularly dealing with the general public, especially if the public can come onto their premises or they work on the public's goods or on their persons (bodies), definitely does.

If a mechanic does a repair on a customer's brake lines and then that person crashes into a wall, who do you think they'll seek to blame, if they're mean-minded? The last man that touched their car!

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