Running a company can be a life-long dream come true for many people, but as a business owner you’ll know better than anyone the risks that come with it. For example, your company could be sued by a client for providing poor advice, or by a customer who is injured whilst on the business premises. Alternatively, employees who are injured at work can sue your business.
Putting in place the right combination of business liability insurance products can protect your business and your employees against these primary risks. Below we explain how the three most common types of business liability insurance work, and who needs them.
Business Liability Insurance
There are three main types of business liability insurance: public liability, employers’ liability and professional indemnity. Many businesses will need public liability and employers’ liability insurance; professional indemnity insurance is only applicable to businesses that provide professional services. Here is how each of these three products works.
Public Liability Insurance
Public liability is a very common type of business insurance. It protects against claims made by third parties that a business is responsible for an injury or damage that occured. Third parties can include your customers or clients, vendors, visitors to your business premises or other members of the public.
Any business that has in-person exposure to third parties needs public liability insurance. This includes any business where you visit customers or customers visit you. For example, a pub needs public liability insurance to protect against customers slipping on a wet floor and falling, among other perils.
Professional Indemnity Insurance
Professional indemnity insurance is needed by businesses that are paid for giving professional advice or providing a professional service. This type of cover protects against a client suing, claiming that the advice or service was negligent and resulted in a financial loss.
For example, architects and accountants need professional indemnity insurance. An architect could be sued if they make a mistake in a set of blueprints that results in an expensive construction mistake. Or an accountant could be sued for negligence if they fail to advise a client they’ve hit the VAT threshold and need to register.
While professional indemnity insurance is not a legal requirement, many professional bodies do insist on members having a suitable policy in place before trading.
Employers’ Liability Insurance
Employers’ liability insurance is required by law for any business with employees, even if they are paid in cash or working on a short-term or temporary basis. There are a few exceptions such as businesses that employ only family members, but most companies will need this. Going without isn’t just against the law, it can result in fines of £2,500 for every day your business is not properly insured.
Employer’s liability insurance protects against claims made by employees who are injured or fall ill through their job, and sue their employer. For example, an employee might claim the employer is responsible for the injury due to poor safety standards and training. This type of cover pays for legal costs to defend a claim as well as any payouts the company is required to pay the employee.
Other Employee Benefit Insurance Products
While employers’ liability insurance offers certain protection in situations where an employee is injured or falls ill due to their work, a business can use additional employee benefits to expand the protections for ill employees, and to attract top talent.
Employee benefits provide financial support to employees and their families if the employee passes away or becomes too ill to work, even if the illness was not related to work. While there are a few different options to choose from, the most common are life insurance, critical illness cover and income protection.
In short, life insurance policies can pay out a lump sum to an employee’s family if they die. Critical illness cover can pay out a lump sum to an employee who is diagnosed with a critical illness. And income protection provides financial support to an injured or ill employee through regular monthly payments that reflect a percentage of the employees’ wage.
Each business has a unique set of risks to manage, and business liability insurance is just the start of a comprehensive package. Many businesses will also have property or vehicles to insure, and they may want to invest in additional niche products such as key person insurance to protect against something happening to any employees that are critical to the business’s success.