Whether you’re self-employed or run a business, you know that insurance is a must-have. First of all, it will buy financial peace of mind. Secondly, it will help to protect your professional image too. But it’s not always straightforward to get to grips with exactly what insurance you need. To make it easier, we explain what’s the difference between public liability and professional indemnity insurance.
It pays to understand the different types of premium
Public liability insurance and professional indemnity insurance are two types of insurance you’ll regularly hear about. Knowing the difference is important so you can ensure you have the right policy for your needs.
First, what is public liability insurance?
Public liability insurance pays the legal costs involved in any third-party claims for damage to property or personal injury.
For example, if a member of the public is injured or their property is damaged by anything connected with you or your business, they can sue you. This can include customers, visitors, and passers-by. If something happens, they can take you court to request financial compensation. Bear in mind that thanks to ‘no win, no fee’ legal services, it is very easy for individuals to make a claim. Unfortunately, even if your business is not found at fault, it can cost a huge amount of money to defend your case.
What does it cover?
Public liability insurance covers your legal costs if a claim is made against you. For example, this includes your solicitor and barrister fees to defend your case as well as any compensation that is awarded.
Who needs it?
Any business that comes into any contact with the public should think about taking out public liability insurance. It is considered an essential where you regularly come into contact with the public. If you have heavy equipment involved in your work it’s also vital because this could cause major injuries or damage if something goes wrong.
For example:
- If you’re a DJ, public liability insurance covers your legal costs if anything happens to a member of the public, or their property, due to your equipment or actions.
- If you run a restaurant, pub or bar, your public liability insurance will cover you for accidents such as slips and trips in the customer loos as well as claims against you for food poisoning or an allergic reaction to mislabelled food.
- Spilt hair bleach damages a designer handbag belonging to one of your customers in your beauty salon. Your insurance will pay up for a repair or replacement.
- The delivery driver trips on a loose step at your office and injures her back. Public liability insurance will pay your legal fees and any compensation.
How much can a public liability injury claim cost your business?
Injuries that result in a permanent disability can result in high levels of compensation. That’s because compensation is designed to help to cover the extra costs associated with living with a disability. Even minor injuries can attract high levels of compensation. And remember, the public can claim for additional compensation for mental anguish as well as time off work as a result of the injury.
As a guide, Accident Claims Advice says:
- Permanent disability or loss of arms or hands can result in compensation of around £160,000. Even mild injuries can result in an award of around £5,000.
- Compensation for back injury can be around £20,000. Payment for the most severe injuries is over £100,000.
- Loss of sight can lead to compensation of over £200,000.
- A severe foot injury can lead to compensation of up to £160,000.
- A severe leg injury can mean compensation of over £220,000.
- A person suffering from a minor head injury and no injury to the brain could claim around £3,000 to £6,000.
- Short-term psychological injury can be awarded £4,000-£10,000.
- Longer-term psychological harm that is severe or permanent can mean compensation upwards of £50,000.
Lastly, who does not need it?
You’re unlikely to need public liability insurance if you’re a freelancer who works from home and has no clients or other members of the public visiting your business. That’s because th
Next, what is professional indemnity insurance?
Professional indemnity insurance protects you financially against claims by clients who are unhappy with the work you have provided.
What does it cover?
If a client alleges your work includes mistakes or you have been negligent and this results in financial loss, a professional indemnity insurance policy will cover the cost of your defence. This is the case if their claim is valid or not. Your insurance will also pay-out any compensation that is awarded, up to the level of cover you have chosen.
Lastly, who needs it?
It is considered essential for people who provide a specialist service such as design or consultancy where a professional opinion is given. For example, if you:
- Advise your clients on how something should be done or handled. For example, if your client considers this advice was wrong, they can sue you.
- Handle data belonging to a client or business. That’s because if this data is compromised, your client can ask for compensation.
- Are responsible for a client’s intellectual property. Again, if this is compromised, you can be sued.
You may feel confident in the quality of your work. However, any small business is vulnerable to a claim of negligence when professional advice or services fail to meet a client’s expectations and cause financial loss. 
Professionals who cover themselves and their business with professional indemnity insurance include:
- Accountants.
- Architects.
- Auditors.
- Bookkeepers.
- Building contractors.
- Chartered surveyors.
- Complementary therapists.
- Dentists.
- Health and safety consultants.
- Graphic designers.
- Nutritionists.
- IT consultants.
- Solicitors and lawyers.
- PR or marketing consultants.
- Surveyors.
- Translators and interpreters.
- Web designers.
Finally, finding the right insurance for your business
if you’re still not sure what’s the difference between public liability insurance and professional indemnity insurance, call our friendly team. We can help you to decide what cover is right for your business. Then we’ll shop around on your behalf to find it at the best price. Call us on 0117 955 6835 or get in touch for free advice and a no-obligation quote.
This article was originally published in April 2014 but has since been completely updated to provide you with the best and most accurate information.