Member Article
Buying £5 million of public liability insurance typically costs around £140 a year in the UK for a small business.(Source: https://www.nimblefins.co.uk/business-insurance/public-liability-insurance-uk/average-cost-public-liability-insurance-uk) But the premium a business pays for public liability insurance depends on many factors. So one business might pay under £100 for £5 million of public liability insurance, while another company can pay multiples of this figure. It depends on the risk profile of the company.
Interestingly, £5 million of public liability insurance does not usually cost 5X the cost of a £1 million policy. Typically the first million of cover is the most expensive, then each additional £1 million of liability cover gets cheaper. So if a business is debating over the level of cover they should have, it can often make sense to bump up to a higher level of cover as this may cost less than expected.
It’s always worth comparing quotes across different levels of cover, as well as comparing quotes from one provider to the next in order to find the best deal. Public liability insurance quotes can vary considerably from one provider to the next, as they each have their own unique pricing models. For instance, one underwriter might have enough risk from one type of industry on their books so they might discourage more business by pricing policies quite high relative to the competition.
Public liability insurance is cheaper for some businesses
One of the primary factors an underwriter uses in determining the premium is the type of business, that is, the line of work a business does.
Businesses engaged in work that is deemed to be riskier from a third party risk perspective are, not surprisingly, charged more for public liability insurance. For example, a builder will pay a higher public liability premium than a tutor. There are much greater risks to third parties from a builder. Consider a client coming to check a building site and slipping on a muddy path, tripping on tools that were left out, being hit by a falling piece of debris, falling into a hole in the floor, hitting their head on scaffolding. The list goes on and on.
On the other hand, a customer coming to see a tutor faces a much smaller chance of being injured. They could slip on a wet floor or be injured if their chair breaks, perhaps. But the risks are clearly much lower for a tutor than for a builder. As a result, an insurance company will charge less to provide public liability cover to the tutor than to the builder.
There are many other factors at play as well, including the size of the business, location, number of employees, and more. Even the business structure makes a difference. So a limited company typically pays more for public liability than a sole trader, for instance. Partnerships typically fall in between the two.
Regardless, it is very sensible to have a policy in place, especially when you consider that over the last decade personal injury awards from the courts have been getting higher.
What is public liability insurance?
Public liability insurance is a type of business insurance that protects against accidental injury and damage claims made against a business by third parties. If a member of the public is injured in an accident (like slipping and falling) and they blame the business, they can sue the business.
Public liability insurance is used by a business to protect against situations like this. The insurance policy would cover legal expenses to defend against the claim, and if the business was found to be at fault, the policy will even cover any compensation that the business is required to pay the injured party.
It is similar to the third-party insurance that you are required by law to have when driving a car. However, public liability insurance for a business is not required by law. It might be required by certain customers or contracts, however.
Who needs public liability insurance?
Generally speaking, a business needs public liability insurance if they have physical exposure to any third parties. This could mean having business premises, meeting in-person with clients or customers, or having any other physical exposure to third parties. If there could be an opportunity for anyone to be injured and blame the business, or any third-party property to be damaged by the business, then public liability insurance is in order.
Even companies that never see clients in person can need public liability insurance. For instance, a B2B warehouse business should have public liability insurance. What if a vendor stops by and is injured in the warehouse? Or the postman? Or the landlord?On the other hand, a self-employed web designer who works virtually and never meets clients in person probably does not need public liability insurance. Why? There really aren’t any opportunities for a member of the public to be physically injured and blame the web designing business.
Considering the relatively low cost of public liability insurance, it’s a type of cover that most businesses will need.
This was posted in Bdaily's Members' News section by Erin Yurday .
