Professional indemnity vs public liability insurance - What's the difference?

Navigating the choppy waters of insurance can be a daunting task, especially when you're looking for cover that protects you as a professional. Do you go for professional indemnity or public liability insurance? Perhaps you should consider having both, or do you really need that level of coverage?

In this article, we'll take a closer look at the differences between public liability insurance and professional indemnity. Whereas public liability insurance covers your financial position against claims from the public, professional indemnity can protect you against claims for professional errors or negligence.

It's this distinction that we'll examine in greater detail, looking at both the differences and similarities, as well as answering a few common questions about this complex subject. Remember, if you have any further queries about public liability insurance or professional indemnity, Park Insurance is here to help.

Public Liability insurance - the first line of financial defence for any business

Let's first take a look at the more common of the two - Public Liability Insurance, or PLI. Public liability insurance is specifically designed to provide you with financial protection when a member of the public makes a compensation claim against your business for injury, illness or property damage. Claimants could be anyone from a customer who slips and trips on an uneven floor in your shop, a passer-by injured by a falling sign, or a supplier injured while making a delivery to your premises.

Something as seemingly innocuous as knocking a cup of coffee over a customer's laptop in a cafe could lead to a claim for compensation. PLI can protect you against the cost of the compensation payment as well as your legal costs if the case goes to court.

The level of cover you have will depend on your policy. Most public liability insurance policies range from £2 million to £5 million or even more. That may sound like a considerable amount, but a protracted and serious legal case for compensation, if someone suffers a life-changing injury, could cost your business hundreds of thousands of pounds if you don't have the right cover in place.

Professional indemnity insurance - the professionals' choice

Professional indemnity insurance is a different type of cover. Rather than protecting you or your business against personal injury or damage to property, professional indemnity protects you financially against claims for compensation as a result of professional mistakes or negligence associated with work done for a client.

For example, if you run an advertising agency and incorrectly put the wrong information into a client's brochure, they may then claim against you or your business. Professional indemnity insurance covers everything from harmful, inaccurate or misleading business advice (if you advise a client to make a decision that adversely affects their business), sub-par work, defamation, or what could be construed as professional errors.

How this is proven is that the claim will take into account what a client should reasonably expect from you in terms of quality of service, professional advice or a breach of a confidentiality agreement. It will cover the cost of your legal defence, any compensation payouts, and additional costs for correcting the issue or any loss of earnings as a result of your error.

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

Both types of insurance provide personal financial protection. The key difference between the two is that PLI provides cover for compensation claims as a result of personal injury or damage to property. Professional indemnity insurance protects against claims resulting from professional errors or negligence rather than physical injury or damage.

FAQs

To help you decide which type of insurance to buy, let's take a quick look at the most commonly asked questions regarding public liability insurance v professional indemnity:

Are professional indemnity insurance and public liability insurance legally required to do business?

Neither are legal requirements. The only insurance you must have is employer's liability insurance if you employ workers (including part-time, voluntary workers, and family members).

Do I need both professional indemnity and public liability insurance?

While you don't legally need either, it's good business practice to ensure your operations are insured against claims. If you work with the public (such as running a restaurant, retail outlet, or as a tradesperson), public liability insurance is an essential layer of protection against costly financial claims. Suppose your business is built around a service (such as a financial advisor, architect, or personal trainer). In that case, professional indemnity insurance may be an essential additional protective aspect of your insurance portfolio.

How much does public liability and professional indemnity insurance cost?

The cost of your public liability or professional indemnity insurance will depend on the level of cover you require. You can purchase them separately or as part of a business package, which could reduce your costs.

When do I need to obtain professional indemnity and public liability insurance?

If you are a stallholder at markets or fairs, you may need to obtain public liability insurance before you can trade (locations may request to see a PLI certificate before they allow you to set up a stall). For professions such as financial advice or architecture, it is advisable to have your professional indemnity insurance in place from the outset.

Can I take out both professional indemnity insurance and public liability insurance simultaneously?

Yes, if your finances allow it. Our top tip: Secure public liability insurance coverage first if you are working directly with the public. You can then add your professional indemnity cover at a later date if needed.

How to find the best insurance - Talk to Park

You can go online and search for public liability insurance, but can you be sure that the policies you see are right for your business? What if you're working from home? Do you still need the same level of cover? And does the professional indemnity insurance policy you've chosen send out the right professional message to your clients?

At Park Insurance, we've spent over 30 years helping individuals and businesses of all sizes find the right insurance at the right price. You can find out more about our Professional Indemnity Insurance online, as well as our wide-ranging Public Liability Insurance.

If you need a more bespoke solution as part of your business insurance package, contact us now and speak with one of our expert advisors for no-nonsense, practical, and impartial advice.