Business Liability Insurance: What Exactly Do I Need?

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Business Liability UK

Businesses in the UK are at risk of liability claims from all sides: employees, clients/customers, and even other third parties like passersby. Without the right liability insurance you and your business could be at risk of financial ruin if you're sued. Find out when liability cover is required by law, see examples to understand how each type works and learn about typical costs.

If you’re interested to know what a business liability quote might look like for your business, take a look at our quote form to receive no-strings-attached quotes from a few of the UK’s best insurance providers.

6 Types of Business Liability Insurance

Businesses of all sizes can face liability claims on four primary fronts, from:

  • Third parties injured or their property damaged in the course of you doing business
  • Third parties injured or their property damaged by a product you make, design, repair or sell
  • Employees who are injured or fall ill while working
  • Clients who claim your professional advice or service was negligent
  • Clients or other third parties affected if you're a victim of a cyber crime (e.g., hacking or a virus)

Luckily, there are four business liability insurance products in the UK market that can protect you and your business financially against these types of risks. It's critical to get the right cover in place for your business, or you could face a very difficult and expensive road if something were to go wrong. Even if you are extremely careful and diligent, accidents happen. Here's how to get the right protection.

Public Liability

If you or your business has physical, in-person exposure to members of the public (e.g., customers) or their property, public liability insurance can protect against injury and damage claims.

Product Liability

If your business designs, makes, fixes or sells anything then product liability insurance can protect against claims made by third parties that your product caused an injury or damage.

Employers' Liability

If you have any staff or employees you are required by law to take out employers' liability insurance, which protects against illness or injury claims made by employees.

  • Read more in our employers' liability guide.

Professional Indemnity

Professional indemnity insurance (aka professional liability) protects against claims made by clients that your professional advice or service was negligent.

  • Read more in our professional indemnity guide.

D&O Liability

Directors & Officers (D&O) insurance should be strongly considered to protect these individuals from being held liable for business decisions. D&O insurance protects their personal assets, which could be at risk.

Cyber Crime Insurance

Cyber liability insurance protects against losses related to hacking, data breaches, viruses and other cyber crimes.

  • Read more in our cyber crime liability guide.

Business Liability Examples

What does all this really mean? Let's look at some example to see how each type of insurance can work in real life.

  • Public Liability: A restaurant has a self-serve water station at the side of the dining room. Spilled water is not mopped up in a timely manner. A customer slips and injures their back, and sues the restaurant.
  • Product Liability: A small toy design company sells a product that includes small holes in the design. A child gets their finger stuck in the holes and the design company is sued for negligence for designing and selling a dangerous product.
  • Employers' Liability: An employee falls from a ladder supplied by a construction company, and seriously breaks their hip. The employee can't work for months and sues the construction company, claiming the ladder supplied was not suitable for the job.
  • Professional Indemnity: A management consultant is hired by a drinks distributor to improve profitability. The drinks distributor implements the management consultant's programme, but a year later the distributor's profit margin is significantly lower and they sue the management consultant for the losses.
  • D&O Liability: HMRC suspects misappropriation of tax payments and investigates a small business, requiring tax experts to mount a defense.
  • Cyber Liability: An accountant stores sensitive customer information in a database that is hacked. Criminals gain access to the database and steal sensitive customer financial information. Cyber insurance can pay to investigate the hack, cover legal fees, notify customers, provide credit score monitoring for affected customers and any settlements or judgments in the case.

What Does Business Liability Insurance Cover?

All four types of business liability insurance essentially cover the same types of costs if you're sued:

  • Legal expenses
  • Compensation payments you're required to make

Who Needs Business Liability Insurance?

Most companies need at least one form of business liability insurance. Answer these questions to help you decide which applies to your situation.

Do your customers visit you, or do you visit your customers?

If you any in-person dealings with members of the public or their property, (e.g., you have a store, shop, restaurant or even if your clients visit you at home—or if you visit customers at their premises), you'll want to buy public liability insurance. Get quotes here.

Do you design, sell, make or refurbish any goods?

If you are involved in any stage of the supply chain process from design to sale of a product to customers, you'll want product liability insurance (FYI it's usually combined with public liability insurance). Get quotes here.

Do you have any employees?

If you hire any staff or employees, even short-term or temporary workers, you'll need to buy an employers' liability policy. It's required by law. Get quotes here.

Do you sell your professional advice or services?

If you are paid for your professional advice or services (e.g., architect, on_current="true" url="/business-insurance/interior-designer-insurance-uk" title="interior designer insurance"interior designer, some builders, accountant, independent financial advisor, consultant, etc.) then you'll want professional indemnity insurance. Get quotes here.

Is your business a private or public limited company?

If your company has any directors or officers (e.g., senior managers), you should strongly consider directors & officers (D&O) insurance to protect the personal assets of these individuals—they can be held personally responsible for business decisions they make, putting their assets at risk.

Do you hold sensitive client information or take payments?

If you hold any sensitive customer information (e.g., financial information, personal information, etc.) or your business relies heavily on IT or computer systems then you're want to consider buying a cyber insurance policy.

How Much Does Business Liability Cost?

Business liability can range from as little as £50 a year up to thousands of pounds a year. Your industry plays a large role in the cost of insurance, as does the size of your business, previous claims history, the types and levels of cover you need, and more. Ultimately business liability underwriters use models to determine the potential risk your business presents, and price accordingly. No two businesses are likely to pay the same amount.

To give you a rough idea of how business liability insurance quotes vary by industry and type of cover, we've gathered sample quotes for a few different businesses. As you can see, a builder's most expensive liability insurance would inevitably be employers' liability[symbol:m-dashs]not a surprise given the dangerous nature of construction work. In fact, workplace injury statistics put the construction industry as the 3rd most dangerous industry to work in—one reason why construction insurance is so expensive.

Graph showing the average cost of business liability insurance in the UK

On the other hand, safer businesses like architecture or accountancy have lower employers' liability costs but have higher professional indemnity costs—not a surprise really as a mistake in blueprints or bookkeeping could have significant financial repercussions for a client.

How Much Does Business Liability Insurance Cost?Public and Product Liability (£5M)Employers' Liability (5 employees)Professional Indemnity (£2M)
Building Company£129£1,524£926
Architect£69£398£1,977
Accountant£66£335£1,008
Average£88£752£1,304

Even your business structure can play a part—if you're a sole trader or partnership you're likely to pay less. For more in-depth research into how all these various factors can affect your insurance prices, see our articles on:

Where Can I Get Business Liability Quotes?

Even if you need more than one type of business liability cover, it's usually possible to buy all the coverage you need from one source—this makes your life easier at renewal time and when it comes time to make payments. And when you buy multiple products from one source you also might have a better chance of securing a discount.

Compare business liability insurance quotes here—after filling out a short form you'll receive quotes from up to five business liability insurance providers. You can even request a call back if you still have questions that you want to discuss. Then choose the cover that offers the best price and features for your needs. Get covered today!

FAQs

Small businesses can pay as little as £50 a year for public liability insurance, if that's the only type of liability insurance they need. But other types of small business insurance can really increase your costs—for instance, mandatory employers' liability insurance costs start from £60 to £200 or more per employee each year depending on the work they do. Read more about small business liability insurance costs here.

Business liability insurance is coverage that protects your business against lawsuits, covering legal fees and compensation you're required to pay. There are six main types of business liability insurance, which each cover a different risk.

Click here to compare business liability insurance quotes for a small business. After filling out a short form with some basic information, you'll get quotes from up to five insurance providers.

The best liability insurance for a small business really depends on the type of work you do (if you give professional advice or service you should have professional indemnity, if you have in-person exposure to third parties or their property you should have public liability, etc.), how your company is structured (limited companies may want D&O insurance) and if you have hired anyone (in that case you'll need employers' liability insurance). Read more about what each covers here or start getting quotes here.

Yes, you can buy business insurance before you start trading and even before you officially form or register your company. Most insurance applications ask for your company name and address only, not a company's house registration number. If you're in an industry such as market trading or taxi driving where you need a trade licence to operate (find out here at Gov.uk) then you can usually buy your insurance before getting your licence—just be sure you don't start trading without your licence!

Only employers' liability insurance is required by law—you need it if you have any employees or staff working for you, even part time or temporary. Other liability insurance coverages might be required based on your trade, for instance certain trade organisations require minimum levels of public liability insurance.

If you needed professional indemnity insurance or D&O insurance while working, you should consider buying a run-off insurance policy to protect you after you stop working, because claims can be made up to 6 years (or more in some cases) after you worked. Read more in our article explaining run-off insurance.

Methodology

Business liability quotes were gathered for a sample limited company in the South of England. No fewer than the five cheapest quotes were averaged to give us our results. Our sample profile had no prior convictions and had never been denied insurance. Your costs may be higher or lower depending on the difference in variables your risk profile is measured by.

Erin Yurday

Erin Yurday is the CEO, Co-founder and Editor of NimbleFins. Prior to NimbleFins, she worked as an investment professional and as the finance expert in Stanford University's Graduate School of Business case writing team. Read more on LinkedIn.

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