Public liability insurance — A brief introduction into its legalities in the UK

Public liability insurance — A brief introduction into its legalities in the UK
Photo: Bychykhin Olexandr via Bigstock

While there are no legal compulsions to getting public liability insurance in UK, it has still become a very important type of insurance to avail. This is because it helps to protect companies and businesses especially ones that deal directly with customers.

Hence today more and more business houses ensure that they have a public liability insurance taken out as a safeguard against demands and claims made by the customers.

Public liability insurance – a definition

As the name suggests, this insurance deals with public liabilities. Public liabilities can range from anything which involves damages caused to property and injury caused to people.

In both instances there is a loss suffered by the general public which makes them make a claim against the company or business house concerned and ask for a proper settlement. However, this insurance can only be used for claims made and legal action taken by external parties.

For dealing with claims made and any legal action taken by employees against the company, the company needs to compulsively have an employee’s liability insurance as mandated by the state laws. In fact even claims made by clients are not covered by this policy but the company rather needs a professional indemnity insurance to address the same.

Need for a public liability insurance

The need for this insurance lies in the fact that accidents can happen anytime and anywhere. And these accidents can also result in losses involving either physical injury, property damage or both.

Since these losses generally give rise to exorbitantly expensive claims being made by the aggrieved party, there is always a need to protect the company from financial losses incurred as a result. Thus public liability insurance is recommended since in instances wherein a claim is made, this insurance helps out the company concerned by ensuring payment of:

  • All the lawyer’s fees incurred during the course of the court case,
  • Medical bills incurred by the injured party,
  • Expenses incurred due to the repair of the property damaged,
  • Any settlements that are mutually agreed on by the company concerned and the person incurring the damage.

What to consider when buying this policy

Almost all insurance providers today have public liability insurance policies but before accepting the terms and conditions of one, it is important to check out:

  • The costs involved in the same by way of premiums that need to be paid,
  • The maximum level of cover that the policy generally has on offer,
  • Ways and means available to increase the level of cover provided,
  • If the policy holds true for all the different aspects or activities of the business concerned,
  • And make sure that the policy conforms with the rules and regulations that have been set by the government in this regard,
  • Terms and conditions of the policy being purchased.

Factors to determine the terms of the policy

Whenever a company or business house opts to buy a public liability insurance, it looks at ensuring the

This can only be achieved if the policy covers all activities pertaining to the business and also offers a good coverage in lieu of lower premiums. But both the factors are dependent upon:

  • The risks involved in the business concerned wherein the riskier the business, the more is the level of coverage and higher is the premium amount,
  • The total strength of the business since a smaller business concerns will require lesser coverage and thus lower the amount of premium to be paid,
  • The nature of the business concerned wherein some businesses wherein the risk involved is less can opt for a policy with lower level of coverage offered and also lower premiums,
  • Whether the business deals mostly with the public or private sector since companies involved in dealings with the public sector need more coverage and thus also need to pay higher premiums,
  • Other additional benefits purchased along with the policy.

Thus it is very important to understand the requirements of the business in terms of the nature of business and inherent risks involved to determine the amount of coverage most appropriate for the business.

While for a small company or self-employed people dealing with the general public, this policy might initially seem like an additional financial burden, in the long run it proves otherwise. In fact taking out a comprehensive public liability insurance can prove to be quite beneficial, both with regards to its potential, reputation and financial impact.