Small business public liability insurance

As a small business, you might think you can do without public liability insurance. But it can give you crucial help in covering you against claims, legal fees and other costs if someone is injured or property damaged as a result of your work. Find out what it is and how it works.

Written by

Emily Kindness

Last Updated

17 MAY 2022

7 min read

What is public liability insurance for a small business?

Small business public liability insurance can protect you against claims and legal costs from a person (for example, a client, supplier or member of the public) who suffers injury or damage to their property, either at your place of work or while you’re working off-site.

What does public liability insurance cover?

Public liability insurance covers you for compensation claims made against you from the public who interact with your business. Here are examples of what’s included with a public liability insurance policy:

Medical costs cover - if someone suffers from an injury or illness, because of your business’ negligence or malpractice, a claim could force you to cover the cost of their medical treatment.
Property damage cover - if you, or an employee, damages someone’s property while carrying out work, you could be liable to pay for the repairs.
Compensation claims - if a member of the public makes a claim against you for either of the above, you’ll not only be charged for repairs or medical treatment, but you could also face claims for compensation.

What isn’t included in public liability insurance?

If you’re a small business, it’s also worth knowing what’s generally excluded from public liability insurance. You won’t be covered for any injury to your employees because of the work they do for you – for that, you need employers’ liability insurance.

Nor will you be covered for the cost of any fines or penalties you incur. There may also be exclusions around damage that occurs from pollution or asbestos, so make sure you check any policy before you buy so you understand exactly what you’re covered for.

Why does a small business need public liability insurance?

Public liability insurance isn’t a legal requirement for business owners, but if you deal with the public then it’s a good idea to consider adding this cover to your business insurance policy.

Small businesses and sole traders don’t have the same resources as larger companies and, if someone made a claim against you, you might not have the internal support to deal with it. For example, unlike a large company, you’re unlikely to have a legal team, so insurance could help you cover the cost of any legal advice and proceedings against you.

With a small business, even a minor claim against you could wipe out your profitability and put your business at risk, depending on how large a cash reserve you have. It could even end up putting you out of business.

Just imagine some of these scenarios where a business could face issues:

an event organiser getting sued by an attendee who’s injured themselves tripping over something left lying around
a plumber sued for damages to floor coverings by an accidental flood during a repair
a customer who has a scalp problem after having a reaction to hair dye a hairdresser has use
a window cleaner breaking an expensive pane of glass in someone’s home.
a market trader whose stall or stock causes injury to a customer or passer-by

In these kinds of cases and similar situations, public liability insurance cover can help you to resolve the issue, from covering legal fees to paying out compensation.

Some organisations might require you to have public liability insurance before they even consider working with you. Having this type of insurance also indicates that you take your responsibilities seriously, even if it’s not a formal requirement.

What small businesses need public liability insurance?

It’s worth considering if:

You have an office or business premises where members of the public visit
Your business organises or hosts events and activities
You work from home and customers come to see you there
You work anywhere the general public has access to, such as the street or at a customer’s site
You want to set up a stall at a market or a craft fair – in these cases, public liability insurance may be a requirement before you’re given a pitch.

How much does small business public liability insurance cost?

The cost of a public liability insurance policy can vary depending on:

the insurance provider
the nature of your business
your previous claims history

Premiums tend to be higher if your business involves more risk – such as working at height or in high temperatures. The more information you provide upfront, the easier it will be for the insurance provider to find a policy that fits your business needs.

What is the best liability insurance for a small business?

When choosing public liability insurance for your small business, look for:

Level of cover – this is the maximum amount your insurance provider will pay out. Typically, the lowest standard level of cover is £1 million and you may consider that this is sufficient for your business. However, if your business means you have considerable exposure to the public, you might want to consider a higher level of cover. Some insurance providers will offer up to £10 million.
Your contract requirements – check whether any of your clients require a certain level of cover. Local authorities usually ask for a minimum cover level of £5 million before you can tender for work, but some may want a minimum of £10 million. It’s worth checking before you tender for contracts that your insurance fulfils any requirements.
Business activities covered – check exactly what activities are covered by the policy and that there are no exclusions that might affect you.
Compensation for loss of work – this could prove invaluable if you have to go to court and miss out on a few days of work.

Getting the right public liability insurance cover will depend on your business’ needs. Business owners need to make sure that their companies are protected against the variety of compensation claims that can be made against them, from property damage to injuries. To make sure you can cover any compensation costs, without hurting your bottom line, a public liability insurance policy is well worth considering.

What is the public liability insurance limit for a small business?

The public liability insurance limit refers to the maximum amount you can claim for, based on your policy. Different levels of cover are available, and depending on your business needs, you might decide your public liability insurance policy needs a higher limit, because your business is at greater risk of compensation claims being made against you. Remember, your public liability insurance policy will need to include enough cover for compensation costs, legal fees, as well as any medical or repair costs being claimed for.

As we mentioned earlier, some businesses or regulators may require you to have a certain minimum limit of public liability insurance cover in place, before they’ll do business with you.

Frequently asked questions

I have professional indemnity insurance. Do I need public liability insurance too? What’s the difference between the two?

Professional indemnity insurance can protect you against claims for compensation because you gave clients bad advice, for data breaches, bad design or poor specifications and so on. Public liability insurance is designed to cover you for accidents, injuries and damage to property.

For example, if you’re a consultant who meets clients in your home and one of them trips and injures themselves, public liability insurance could cover you if they made a claim against you. But if you breached their confidentiality by accidentally sending an email to the wrong person, then professional indemnity insurance could help.

When should I get public liability insurance?

If your business interacts with the public, you should consider getting public liability insurance cover as soon as possible. Without it, you’re vulnerable to claims being made against you from the public, which could cost your business thousands of pounds.

What is the difference between employers’ and public liability insurance?

Employers’ liability insurance covers you against claims made by your staff. It’s also a legal requirement. Public liability insurance covers you against claims made by members of the public. It isn’t a legal requirement.

Do I need public liability insurance if I am self-employed?

Public liability insurance isn’t a legal requirement, whether you’re self-employed or not. However, if running your business involves interacting with the public, you should consider this type of cover. That’s because, no matter the size of your business, you’re still vulnerable to claims for damage, illness or injury, from members of the public who interact with you, your business and its services.

What other types of insurance can I get for my small business?

There are several types of business insurance available. Some of these are a legal requirement or recommended by certain associations, while others are entirely optional or depend on the industry your business operates in.

Here are some types of business insurance you might need:

Employers’ liability insurance – this is a legal requirement if you employ any staff who aren’t direct relatives. It protects you against claims, made by employees, for injury or illness as a result of working for you.
Professional indemnity insurance – this is to protect you against claims made by a customer. This could include defamation, data breaches, a breach in confidentiality and legal costs.
Business interruption insurance – this can protect your business against the cost of being forced to close due to unforeseen circumstances.
Commercial property insurance – to protect your business premises.
Business contents insurance – to protect your business equipment.

Find out more in our guide to the different types of business insurance.