For businesses, especially those in sectors like construction, having the right insurance is crucial.
Two essential types of cover are employers’ liability insurance and public liability insurance. While both protect against potential financial risks, they are distinctly different and cover different liabilities.
Public liability insurance is a form of business insurance designed to protect you and your business from claims made by members of the public. Specifically, it provides protection in the event that a member of the public brings a successful claim against you or your business for personal injury or damage to their property that is caused by your business activities.
A public liability policy covers the costs arising from a successful claim, including damages, compensation costs, and legal fees.
The scope of potential claims can range from relatively minor incidents, such as causing bodywork damage to a customer's car, to far more serious events like a disabling personal injury or even a fatal accident suffered by a member of the public due to your business operations.
It's important to remember that public liability insurance will not cover claims brought against you by your employees.
Employers’ liability insurance is specifically designed to protect your business if an employee, or former employee, brings a successful claim against you for an injury or illness they have suffered as a result of working for your business.
This cover extends to the damages, compensation costs, and legal fees associated with such claims.
The range of incidents covered by employers’ liability insurance can be broad, encompassing situations from relatively minor workplace accidents, such as an employee falling and breaking an ankle, to severe and life-altering events, including life-threatening diseases, loss of limbs, or even death resulting from work-related conditions.
Employers’ liability insurance covers claims from a wide range of workers, including:
- Full-time and part-time employees
- Self-employed contractors hired by your business
- Temporary staff
- Apprentices
- Individuals on training schemes
- Volunteers
The need for both employers' liability and public liability insurance depends on your business and its operations.
Employers’ liability insurance: a legal obligation
If you employ anyone, even just one person, you are legally required to have employers’ liability insurance. This legal mandate exists to ensure that employees are protected should they suffer injury or illness through their work.
Your employers’ liability policy should provide a minimum cover of £5 million. Failure to have this legally required insurance can result in significant penalties, with fines of up to £2,500 for every day you are uninsured.
This is in addition to the potentially much larger financial risks your business would face if an employee were to make a successful claim against you and you were uninsured.
There are very limited circumstances where employers’ liability insurance may not be legally required – typically only if your sole employee is a close family member or is based abroad.
However, even in these scenarios, and especially if you are unsure of your legal obligations, it is strongly recommended that you consult with an insurance advisor to assess your specific situation before deciding against cover.
Public liability insurance: not legally required, but highly recommended
Unlike employers' liability insurance, public liability insurance is not a legal requirement. However, despite not being mandated by law, it is strongly recommended for almost all businesses.
The recommendation for public liability insurance is driven by several factors:
Contractual requirements
Many larger businesses, public sector organisations, and even some trade associations will insist that you have public liability insurance in place as a prerequisite for entering contracts with you or for membership.
Financial protection from claims
Without public liability insurance, if a member of the public successfully brings a claim against you, your business would be liable to pay potentially substantial sums in damages, compensation, and legal fees.
For many small to medium-sized enterprises (SMEs), these costs can be financially crippling and could severely jeopardise the business and its assets.
Risk mitigation
Even seemingly minor incidents involving members of the public can escalate into significant claims. Public liability insurance provides a crucial safety net, protecting your business from these unpredictable financial liabilities.
The fundamental requirements and the core reasons for needing both employers' liability and public liability insurance remain consistent regardless of your business structure.
Whether you operate as a self-employed individual, a limited company, or a partnership, the need to protect yourself from employee claims (employers' liability) and public claims (public liability) is equally relevant.
The level of risk is determined by your business activities and whether you employ staff and interact with the public, not by your legal structure.