UK Public Liability Insurance – A Mystery Explained

Being an employer or business owner, you have a legal responsibility towards your employees, customers and the general public. You are in danger of being held liable and might be sued if a member of the public or an employee suffers an injury as a result of your negligence or breach of duty. If their claim for personal injury compensation is successful, you could also receive a bill from the NHS for the costs of hospital treatment (including ambulance costs should it be necessary).

In a basic form, liability insurance is formulated to pay any legal costs and compensation that might happen if a worker is deemed to be at fault. If you employ even a single member of staff it is very likely that you will need to have employers’ liability compulsory insurance (ELCI).

ELCI requires employers carrying out business in the United Kingdom to insure their liability to their staff for bodily injury or illness suffered whilst in your employment in the United Kingdom. Liability insurance provides greater peace of mind to companies against penalties and legal costs which could result in financial problems, and to employees that finances will be available to pay compensation even if firms have become insolvent.

How are liability insurance premiums calculated ?

The cost of insurance – known as the premium – is normally calculated utilising a “book rating”. It is calculated by starting with an initial charge, which includes the insurance company’s expenses and reflects their desire for your particular type of business – if they want your type of business, the cost will be cheaper than if they don’t.

The policy cost is also calculated on the insurance company’s opinion of the level of risk attached to a particular profession or industry area.

The premium will be adjusted by factors including any previous claims, the size of the perceived risk and your approach to risk management.

The fewer claims that you have made and the safer your working environment, the lower your premium will be.

Prices also include calculations from other similar professions by amalgamating both good and bad – a small business with a good record may be adversely affected by this. Your own approach to risk management plus your safety record can lessen the damage caused by this.

For employers’ liability, the exposure risk is calculated on the basis of the number of employees and the size of the payroll. Additionally, there are further factors that influence how risk is assessed.

For public and product liability the exposure risk is calculated on the turnover of your company and other items such as whether you work away from your normal place of work.

What public liability insurance covers

Professional liability insurance covers any damages and costs awarded to someone following damage to their property or an injury caused by you or your business. Furthermore it insures against any costs, expenses and related legal fees as well as costs of hospital treatment together with any associated ambulance costs that the government may demand from you.

Policy costs vary depending on the type of business you run, the turnover of the business and how many staff you employ.

Public liability insurance can be a complex product and likely clients are urged to read carefully through all of the documentation to make sure that the insurance suits their requirements.

Even if you work from home, if members of the public or customers visit you there, you may also want to consider purchasing public liability insurance.

Some businesses, eg riding stables, are legally forced to have public liability cover. You will also find that a number of your customers or potential customers need evidence of adequate insurance prior to allowing you to do business with them.

Many small business owners or self employed tradesmen will find that there are a variety of products that are designed to their particular trade. These policies can be sold under a number of labels including business insurance, small business insurance or self employed liability insurance. These policies will include a number of individual sections including employers and public liability, together with a selection of legal expenses, professional indemnity and office insurance.