If you’re sorting out your business insurance, you need to be confident that you have the right kind of cover. But with so many different types of policies, it can be hard to work out what you need and why.
General liability may be one form of insurance you are considering. It’s also important to understand the potential costs involved and what factors can influence these costs.
‘General liability’ is typically an American expression. In the UK we tend to call it ‘business liability insurance’ or ‘public and product liability’. You may also hear it referred to as ‘contractors' liability insurance’.
This type of insurance policy is designed to protect you and your business from claims made against you by members of the public or clients for injury or damage. It typically provides:
- Public liability insurance: protects you and your business from claims for damage or injury caused by something your business did or failed to do. The affected parties will either be clients or members of the public.
- Product liability: relates to damage or harm caused as a result of a product you have installed or supplied.
- Business liability: is often used to mean the same as ‘public liability’. However, it can sometimes be used more broadly to include other types of insurance such as employer's liability and professional indemnity insurance, depending on the context. It is therefore important to check the specifics of any policy.
General liability insurance cover is not normally a type of UK insurance in itself, but as mentioned, the terms ‘business liability’ or ‘contractors' liability’ are sometimes used to refer to a bundle of different insurance policies.
You should always check to see exactly what is included in any policy.
Typically, a ‘general liability’ style policy in the UK will focus on public and product liability. It is unlikely to include employers’ liability insurance as standard.
Employers’ liability insurance is a separate and legally required form of cover if you employ staff.
Public and product liability insurance will cover claims made against you or your business for injury or illness caused to someone or damage done to property.
For example, you would be covered if a member of the public walking near your building site tripped over materials left in their way and fractured an ankle. You’re also covered for damage to property, such as a paint spill at a client’s home.
If the damage or injury caused is found to be your fault, you or your business will usually have to pay compensation, damages, and legal fees. This is what your insurance is designed to cover.
Public and product liability insurance is not a legal requirement, but it is often a contractual requirement. You may find some clients insist you have it as a term of your contract, and it also provides essential protection for your business if something goes wrong.
Even seemingly small accidents on site or involving your products can result in a claim against your business for thousands of pounds. Without insurance, you will have to pay these costs yourself. For many tradespeople, public liability insurance is therefore a vital form of protection.
You may need product liability insurance if you sell, supply, manufacture or install products. These could be diverse items, from electrical appliances to products used in domestic settings.
You will need employers’ liability insurance if your business employs anyone, even if it’s only one person, or they are a trainee or volunteer. It is a legal requirement to have this if you are an employer.
Employers’ liability insurance covers you if an employee is injured or develops an illness as a result of working for you. You can be fined £2,500 for every day that you don’t have it, highlighting the importance of maintaining continuous cover.
This will depend on several factors. Normal starting points for public liability cover range from £1 million up to £10 million. For employers’ liability insurance, you must have a minimum of £5 million cover to comply with the law.
Large or public sector organisations will often require you to have a certain minimum level of public liability cover to work for them.
Other relevant factors that will influence the level of public liability cover you may need include:
- the type of work you do
- the value of the projects you work on
- the area(s) where you work
- the size and nature of your business
The cost of general liability insurance, specifically public and product liability cover, will vary depending on several factors.
First, when getting a quote, you need to check what types of insurance it will include. Ask yourself: does this ‘general liability’ policy only include public and product liability insurance or does it also include other covers such as employers’ liability insurance or professional indemnity?
If a policy includes multiple types of insurance, the premium will likely be higher than a simple public liability policy. However, purchasing a package policy can sometimes be more cost-effective than buying several individual policies separately.
In addition to the scope of cover, other factors that affect the cost of general liability insurance include:
- The level of cover you require: As mentioned, standard levels of public liability cover range between £1 million and £10 million, and higher levels of cover will typically lead to a higher premium.
- The size of your business: Larger businesses may face higher premiums due to potentially greater risks or a higher volume of work.
- How many employees you have: If you require employers’ liability insurance, the number of employees will be a key factor in determining the cost.
- Whether you are a limited company, partnership or are self-employed: The legal structure of your business can influence insurance premiums.
- The size and type of projects you carry out: Larger or more complex projects can increase risk and therefore potentially increase insurance costs.
- Where you work: Your geographical area of operation can be a factor.
- Your claims history: A history of previous insurance claims may increase your premium.
You can obtain a policy quote tailored to your specific needs by applying online with a reputable construction insurance company. Shopping around and comparing quotes from different insurers is advisable to ensure you get a policy that meets your requirements at a competitive price.