Public liability insurance is one of the most important types of business insurance in the UK. If your business interacts with customers, clients, suppliers or members of the public, this cover protects you against compensation claims arising from injury or property damage.
For sole traders, contractors, small businesses and larger organisations, understanding public liability insurance is essential for risk management, legal compliance and long-term financial protection.
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What Is Public Liability Insurance?
Public liability insurance covers your business if a third party suffers injury or property damage as a result of your business activities. It protects against legal fees, compensation costs and associated expenses.
It applies whether the incident happens on your business premises, at a client site or in a public location where you are carrying out work.
What Does Public Liability Insurance Cover?
A standard public liability insurance policy typically covers:
- Injury to customers or members of the public
- Damage to third-party property
- Legal defence costs
- Court-awarded compensation
- Out-of-court settlement costs
For example, if a customer slips on a wet floor in your shop or a contractor accidentally damages a client’s property, public liability insurance can cover the resulting claim.
Is Public Liability Insurance a Legal Requirement?
Public liability insurance is not legally mandatory in the UK. However, it is strongly recommended for businesses that deal with the public.
Many clients, local authorities and commercial landlords require proof of public liability insurance before allowing work to begin.
In contrast, employers’ liability insurance is legally required if you employ staff.
Who Needs Public Liability Insurance?
This cover is particularly important for:
- Sole traders
- Builders and contractors
- Retail businesses
- Event organisers
- Tradespeople
- Freelancers working at client sites
- Hospitality businesses
Any business that interacts physically with customers or operates in public spaces should consider this protection.
How Much Public Liability Cover Do You Need?
Policies typically offer cover levels of:
- £1 million
- £2 million
- £5 million
- £10 million
Higher-risk industries or public sector contracts may require at least £5 million cover.
The appropriate level depends on your business size, industry and client contract requirements.
How Much Does Public Liability Insurance Cost?
Premiums vary depending on:
- Business type
- Annual turnover
- Number of employees
- Level of cover selected
- Claims history
- Nature of work performed
Low-risk businesses such as consultants may pay from around £50–£100 per year. Higher-risk trades such as construction may pay several hundred pounds annually.
Comparing quotes from multiple insurers helps ensure competitive pricing.
What Is Not Covered?
Public liability insurance does not usually cover:
- Injury to employees (covered by employers’ liability insurance)
- Professional advice errors (covered by professional indemnity insurance)
- Damage to your own property
- Deliberate acts
Understanding exclusions prevents gaps in protection.
Public Liability vs Professional Indemnity Insurance
These two policies cover different risks.
- Public liability insurance covers physical injury or property damage claims.
- Professional indemnity insurance covers financial loss caused by professional advice or services.
Many businesses require both types of insurance depending on operations.
Contractual Requirements
Public liability insurance is often required in contracts for:
- Construction projects
- Public sector tenders
- Event management agreements
- Commercial property leases
Failure to hold adequate cover can result in lost contracts or legal exposure.
How to Choose the Right Policy
Assess Your Risk Profile
Consider how frequently your business interacts with the public and the potential severity of claims.
Check Policy Limits and Excess
Ensure the indemnity limit meets client requirements and understand the excess payable per claim.
Review Exclusions
Confirm whether high-risk activities are included.
Compare Multiple Quotes
Use regulated brokers or comparison platforms to evaluate insurers.
Reducing Your Premium
- Implement health and safety policies
- Maintain accurate risk assessments
- Keep detailed incident records
- Avoid unnecessary high cover limits
- Bundle policies under a business insurance package
Demonstrating strong risk management can reduce insurer pricing.
Making a Public Liability Claim
If an incident occurs:
- Document the event immediately
- Gather witness statements
- Take photographs if appropriate
- Notify your insurer promptly
- Avoid admitting liability without guidance
Early communication with your insurer improves claim handling outcomes.
Frequently Asked Questions About Public Liability Insurance
Is public liability insurance mandatory for sole traders?
No, but many clients require it before awarding contracts.
Does public liability insurance cover subcontractors?
Some policies include subcontractors, but this must be confirmed in writing.
How quickly does cover begin?
Most policies provide cover from the agreed start date once payment is made.
Final Thoughts
Public liability insurance is a critical safeguard for UK businesses that interact with customers or operate in public spaces. While not legally mandatory, it protects against potentially significant financial claims that could otherwise threaten business continuity.
Before purchasing, assess your exposure, review contract requirements and compare multiple insurers. The right policy provides both financial security and professional credibility in competitive markets.