Differences between public liability and professional indemnity insurance

Key takeaways

• Public liability insurance covers claims relating to injuries or property damage caused by your business

• Professional indemnity insurance covers claims related to negligent advice

• Neither public liability insurance or professional indemnity insurance are legally required, but may be necessary to protect your business

What are the main differences between public liability and professional indemnity insurance?

Both public liability and professional indemnity insurance protect businesses against claims arising from any unintended consequences of their work. But there are some key differences:

Public liability insurance

Intended to cover claims when a member of the public has been injured or died on the premises, or for property damage caused by a business’ activities.

Professional indemnity insurance

Intended to cover claims arising from negligent services or advice given to clients that could lead to financial loss.

Do I need public liability and professional indemnity insurance?

Neither public liability insurance or professional indemnity insurance are a legal requirement. However, without them a claim from a customer or member of the public could be financially devastating, so cover could provide peace of mind and greater security.

Although indemnity insurance is not a required by law, some professional bodies still require their members to have indemnity insurance. Solicitors, for example, will usually need a minimum level of professional indemnity cover because of the high risk of a financially damaging claim.

How does public liability insurance work?

Public liability insurance protects your business from a range of unexpected costs:

What’s covered by public liability insurance?

• Compensation claims for injuries to a third party

• Legal expenses

• The cost of repair if your work has damaged someone’s property

What’s not covered by public liability insurance?

• Injuries to yourself and your employees (this may be covered by employer’s liability insurance, which is a legal requirement for most businesses with employees)

• Damage caused by work that was negligently carried out

• Damage that was intentional

Public liability insurance can be helpful for a range of businesses. Cleaners might be in a position where they accidentally damage something in a property they are cleaning. An electrician could make an honest mistake and cause an electrical hazard. A hairdresser could accidentally injure a client, leading to a claim. In all these examples, having public liability cover would help.

How does professional indemnity insurance work?

Professional indemnity insurance is intended to cover claims arising from professional negligence.

What’s covered by professional indemnity insurance?

• Defamation claims against your business

• Mistakes or incorrect advice that causes a client financial loss

• Policies cannot be purchased to cover retrospective claims – it must have been active when the work was carried out.

Purchasing professional indemnity and public liability insurance

Public liability and professional indemnity insurance can be purchased separately according to your needs, but they can also be purchased as a combined business insurance policy. This will often also include employer’s liability cover, which could be legally required depending on the size of your business.

You can get a premium tailored to you by opting for different levels of cover, but you should be aware of the minimum requirements of any professional membership bodies operating in your profession.

There will usually be an excess on your policy, which is the amount you pay towards any claim before the insurance cover kicks in.

Ultimately, even while not (usually) a legal requirement, both types of cover will help give you the peace of mind that if there was a claim against your business, you would be protected and able to continue operating financially.