What is the difference between Professional Indemnity and Public Liability?
Public liability insurance and professional indemnity insurance are types of business insurance that cover compensation claims, though the nature of these claims differ. The difference between public liability and professional indemnity insurance is that public liability is tailored for claims by members of the public for injury, illness or damage while professional indemnity covers claims by clients for professional mistakes or negligence. While we all hope that business will go without a hitch, having public liability and professional indemnity insurance can offer peace of mind that if something does happen, you’re covered.
How does public liability insurance work?
Public liability insurance covers claims of injury, illness or property damage by a member of the general public against your business. This could include customers, clients, suppliers or passers-by.
Examples of a public liability claim include a supplier slipping on a wet floor on your business premises and injuring themselves, a customer becoming ill from food you served them, or you spilling a drink on a client’s laptop during a meeting and causing water damage.
Public liability insurance can also cover the cost of your legal defence, compensation payments, medical costs and loss of income as a result of the claim.
How does professional indemnity insurance work?
Professional indemnity insurance covers for claims made by a client for professional negligence or mistakes made in the work you have done for them. These may include poor business advice, professional errors, defamation or libel, and sub-standard work. Professional indemnity insurance can cover the cost of legal defence, compensation payments, any additional costs for rectifying an issue and loss of income as a result of the claim.
The key difference between public liability and professional indemnity is that while public liability covers for risks of injury or damage, professional indemnity is focused on the work side of things, covering for professional errors and negligence.
Examples of a professional indemnity claim include a media agency misprinting an advert for a client with the incorrect details, a recruitment business accidentally forwarding on confidential client information, or a consultancy offering a client advice that leads to them making a financial loss.
Are public liability and professional indemnity insurance a legal requirement?
Neither public liability nor professional indemnity insurance are a legal requirement in the UK. The only form of business insurance that businesses may be legally obliged to have is employers’ liability insurance. This is relevant for any business that hires one or more employee. If you are the sole employee of your business, then you do not need to have employers’ liability insurance.
Do you know if public liability insurance is compulsory for your business? What about the legal obligations surrounding employers' liability?
Do I need public liability and professional indemnity insurance?
When comparing professional indemnity vs public liability, both can be regarded as valuable for different reasons. While neither is a legal obligation, having public liability and/or professional indemnity insurance can offer the peace of mind that your business is covered if you do face a claim. Without adequate cover, you could face the full financial brunt of legal proceedings and compensation payments.
If you work directly with the public or interact with clients and suppliers on a regular basis, public liability may be considered a good option to protect your business if an accident were to occur.
Professional indemnity insurance, on the other hand, covers claims for all nature of professional mistakes or negligence, so could prove valuable across all industries.
How much does public liability and professional indemnity insurance cost?
The cost of public liability and professional indemnity insurance depends on various factors used to predict how likely you are to make a claim and how much that claim could amount to.
When calculating a premium for your public liability policy, insurers will consider the industry, size, nature and location of your business, as well as your claims history and the level of risk you face. If you have a high turnover, experience a high volume of members of the public visiting your premises or use dangerous equipment, cover may cost more than for a smaller, office-based business. Public liability insurance quotes from Hiscox start from just £55 a year.
The cost of professional indemnity insurance will depend on the level of cover you choose to take out. You can decide this by considering the worst-case scenario of any claim you might face, and the maximum amount you might need to pay in legal fees and compensation payments. Hiscox professional indemnity quotes start from £100 a year.
Both forms of cover can be purchased as a standalone product or as part of a comprehensive business insurance package.