Professional Indemnity Insurance And Public Liability are types of commercial insurance that cover damage claims, although the nature of these claims differs. The difference between public liability insurance and professional indemnity insurance is that public liability covers claims by citizens for injury, illness, or damage, while professional indemnity insurance covers claims of customers for professional misconduct or negligence. While we all hope your business runs smoothly, having professional indemnity and liability insurance can give you peace of mind knowing that if something happens, you’re covered.
How does Public liability insurance (PL) work?
Liability insurance covers claims for injury or property damage by a citizen against your business. These can be customers, customers, salespeople, or passers-by.
Liability insurance may also cover the costs of your legal defense, fees, medical expenses, and loss of income as a result of the claim.
Large organizations have liability insurance as a good practice as they typically deal with the general public daily, but many self-employed individuals may not be aware of the need for this type of insurance, potentially exposing them to financial hardship damage claims.
Freelancers who meet clients in their own homes, or who meet clients at their clients’ homes, should consider liability insurance in case the worst happens. It’s easy to think you’re conscientious, but many accidents happen because of something beyond our control. Examples of accidental damage to client property by freelancers are not uncommon, but without current liability insurance, they can be expensive.
For contractors, the decision is often easier as many contracts require both professional indemnity insurance and public liability insurance in the terms of your contract.
Public Liability insurance claims can be very varied, the most common examples showing how liability insurance works include the following:
- Slip – A customer visits your business and slips on a wet floor, breaking his arm. As a result, they bind the work and claim against you the economic damage suffered.
- Trips: A customer trips over a loose wire and sprains his wrist. They file a compensation claim against you.
- Falls: a client falls a flight of stairs and breaks his ankle. They claim you for the time they are free and for rehabilitation costs.
How does professional Indemnity insurance work?
Professional indemnity insurance covers claims made to you by a client for professional negligence or errors made in the work you have performed for your client. Claims can be made because of professional error, defamation or libel, poor workmanship, or the perception that you have given your client bad business advice.
Professional indemnity insurance may cover legal costs incurred in defending a claim, compensation payments and additional costs to resolve a problem, and lost income as a result of the claim.
Professional compensation claims are quite common, examples include a creative design agency that creates and prints an ad for a client with incorrect contact information causing the client to miss out on sales inquiries, a recruiting agency that accidentally sends confidential client information, or a business consultant offering a client suffers a financial loss.
Professional Indemnity insurance generally covers the following:
- Professional negligence, such as making a mistake on a job for a client or giving bad advice.
- Accidental breach of confidentiality, such as sharing confidential customer information without permission
- Accidental copyright infringement, such as using an image on your website without permission from the image owner
- Defamation or libel, such as making false remarks about a competitor or customer that damage their reputation.
- Loss of data or documents
- Loss of money or property for which you are responsible.
What Can Public Liability Insurance Cover?
Public Liability insurance covers your business for:
- Compensation Claims Filed Against You
- Property Damage Compensation Claims Filed Against You
- Legal costs related to compensation claims for injury or damage
- Damage claims covered by liability insurance are claims made by members of the public, including customers, customers, vendors, and bystanders.
For example, if you run a restaurant and a salesperson slips on a freshly cleaned floor, or if you run a consulting firm and spill a cup of coffee on a client’s computer equipment, you could face a lawsuit.
This means that liability insurance is useful for most businesses (as most businesses interact with the public), but it is especially important for retail stores, merchants, and salons. Some customer contracts require you to have certain liability insurance.
What Can Professional Indemnity Insurance Cover?
Professional indemnity insurance can cover your business for compensation claims from a client because you made a mistake on the job. The errors it covers may include:
- Professional negligence
- Accidental Violations of Copyright or Confidentiality
- Loss of documents or data
This means that professional indemnity insurance is especially useful for companies that provide professional services or advice. For example, if you accidentally sent confidential client information to a third party, or if your architectural firm made a mistake in its plans and a building collapses as a result, you could be subject to damages.
Professional indemnity insurance is required by some membership bodies and regulators, for example, if you are self-employed as a lawyer, financial adviser, accountant, or architect.
Are Professional Indemnity Insurance And Public Liability Required By Law?
Neither public liability insurance nor professional indemnity insurance is required by law in the UK. The only form of business insurance that companies are required by law to have is employer’s liability insurance. This is relevant for any company that employs one or more employees. If you are the only employee in your company, you do not need to take out the employer’s liability insurance.
Do you know whether public liability insurance is mandatory for your company? What about legal obligations regarding employer liability?
Do I Need Professional Indemnity Insurance And Public Liability?
When comparing professional liability with government liability, both can be considered valuable for several reasons. While neither is a legal requirement, having professional indemnity and/or liability insurance can give you the peace of mind that your business is covered if you do have to deal with a claim. Without proper coverage, you could face the financial consequences of legal proceedings and damages.
If you work directly with the public or have regular contact with customers and vendors, public liability can be considered a good option to protect your business in the event of an accident.
Professional liability insurance, on the other hand, covers claims for all sorts of professional misconduct or negligence, so it can be valuable across all industries.
What Is The Difference Between Professional Indemnity Insurance And Public Liability?
Getting the right coverage for your business is important, so it’s good to know the difference between liability insurance and professional indemnity insurance as they cover different types of risks. Public liability covers you in cases where your business causes property damage or injury to others, and you are responsible for the associated costs. Professional liability, on the other hand, protects you when an incident occurs on the professional recommendation of your clients.
How Much Do Professional Indemnity Insurance And Public Liability Cost?
The cost of professional indemnity and liability insurance depends on several factors that are used to predict how likely you are to file a claim and how much that claim could be.
When calculating a premium for your liability policy, insurers take into account 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 rate, a large number of members of the public visit your facility or use hazardous equipment, coverage may cost more than a smaller company with offices.
The cost of professional liability insurance depends on the level of coverage you choose. You can decide this by considering the worst-case scenario of each claim you may face and the maximum amount you may have to pay in legal fees and fees.
Can I get both?
Absolute. If your business offers a service based on your skills, knowledge, and experience, as well as its buildings for the public to visit, both types of insurance can give you complete peace of mind that your business is protected.
Let’s say you are an accountant who works from home with clients who visit you for meetings and appointments. Professional liability can cover your business for professional negligence claims, while public liability can protect your business if an accident occurs on your property and injures a customer.
Coverage Limits For Professional Indemnity Insurance And Public Liability
Coverage limits for liability insurance versus professional indemnity insurance are also usually a little different. You can generally take out professional indemnity insurance with a limit of cover between £50,000 and £5m, while general liability insurance generally ranges from £1m to £10m.
Purchase Of Professional Indemnity Insurance And Public Liability
You can take out professional indemnity insurance and public liability in one Simply Business business insurance policy, as well as add other business insurance policies.
You can also take out separate liability insurance. And some companies, including accountants, consultants, engineers, journalists, and surveyors, can purchase independent professional liability insurance.