Public liability and products liability insurance explained

If a serious accident occurs on premises, or because of faulty products, an investigation by health and safety authorities could arise. Public liability and product liability insurance provide essential protection for claims brought against you by affected parties.

We explain more about these two insurances and why you might need them for your business.

Public liability insurance

What is public liability insurance?

Whether a slip or trip, inadvertently damaging another person’s property, or causing injury in some other way, public liability insurance provides protection against your legal liability to third parties if you are found to be responsible.

Is public liability insurance legally required?

No. However it may be required by any client contracts you have and some companies who are governed by a regulator or membership body may be obliged to take it out.

How much public liability insurance will I need?

The level of cover you need is related to the amount of risk faced by your business. Cover can be anywhere from £2m to £10m or beyond. The minimum value could be dictated by the clients you work with.

What isn’t covered by my public liability insurance?

Accidents that happen to you or damage to your own property or property being directly worked upon are generally not covered by your public liability policy. Other cover may be available. Incidents that affect your employees are also not covered – this would be covered by your employers’ liability insurance.

Products liability insurance

What is products liability insurance

Products liability insurance covers you against your legal liability in the event that someone is harmed, or property is damaged due to products that are sold or supplied by you. It protects you against the cost of compensation for:

• Personal injuries caused by your faulty product
• Loss of or damage to property caused by your faulty product
• Unforeseeable circumstances such as product faults that your quality control system could not identify

Is product liability insurance legally required?

No. However, if your business designs, manufactures or supplies a physical product that is sold or given away for free, you should consider public liability insurance.

How much product liability insurance will I need?

The level of cover you need is related to the amount of risk faced by your business. Cover can be anywhere from £1m to £5m.

What isn’t covered by my product liability insurance?

Product liability insurance may not cover you for:

• Faulty products resulting from bad workmanship
• Financial losses to a business or person caused by your faulty product

However, inefficacy insurance can also be included within product liability insurance to provide cover for any loss or damage to property caused by a product not working the way it should. This is not a standard cover so it is worth discussing it with your broker to ensure you have appropriate protection for your business.