Having the right insurance is vital for any business. If something goes wrong, you want peace of mind that you and your company are protected.
But how do you know what cover you need?
In this article, we explain the difference between employee and public liability insurance. These are the two main types of business cover, helping protect companies of all types and sizes.
From what these policies include to how much they cost and whether you need both, here’s all you need to know about employers liability insurance vs public liability insurance.
Is public liability insurance the same as employers liability?
No. Employee and public liability insurance aren’t the same thing.
When it comes to employers liability insurance vs public liability insurance, the main difference is who’s making the claim.
Employers liability insurance (sometimes also called employee liability insurance) protects you from claims made by employees or ex-employees. Public liability, on the other hand, protects you from claims made by third parties. This could be clients, suppliers, customers or just members of the public.
Both employee and public liability insurance are types of business cover though. They both protect business owners from injury claims and financial loss – it’s just who makes the claim that’s important.
What is public and employee liability insurance?
Now we know the broad difference, let’s go into more detail on employers liability insurance vs public liability insurance.
We’ll take each in turn.
What is employers liability insurance?
If you’re facing a compensation claim from someone within your company, this usually comes under employers liability insurance.
This type of insurance covers claims like if someone experiences an accident, injury or illness as a result of their work. This could be a full-time or part-time staff member, self-employed contractors, freelancers, apprentices, interns or even volunteers.
As an employer, the health and safety of your employees while they’re at work is always your responsibility. This means if someone hurts themselves, for instance tripping over a loose bit of carpet, you’re liable for any claims. Employers liability protects against this. It covers employers’ legal defences and any compensation claims.
What is public liability insurance?
Public liability insurance protects businesses from damage claims made by people outside the company. It covers situations where a client, customer or member of the public claims your business activities caused personal injury or property damage.
This could be something as simple as a drink spilt on a customer’s laptop during a meeting. It also covers more serious situations such as a supplier falling on some uneven paving and breaking a bone. In cases like this, public liability insurance provides legal fees and compensation costs.
While you only need employers liability insurance if you employ someone, public liability is a sensible idea for any business.
Is public liability insurance compulsory?
No, public liability insurance isn’t a legal requirement. While it’s advisable, there’s no law saying you need public liability insurance to run a business.
It’s only employers liability that’s a legal obligation. If you employ staff of any kind, having appropriate insurance is a legal requirement.
There are a few exceptions to this rule. If your employees are all close family members (i.e. parents or siblings) or if you’re the only staff member of your limited company and hold over half the shares, then you don’t need employers liability insurance.
For most businesses though, you need employers liability insurance covering you for at least five million. If you don’t, there’s a chance you could face fines of £2,500 for each day without insurance. Yes, that’s right. £2,500 a day.
Do I need both employers and public liability insurance?
So, even though it isn’t a legal necessity, do you need both kinds of insurance?
For most businesses, it’s a good idea.
You need employers liability if you employ staff of any kind. But public liability insurance is also important for any businesses working with the general public. Shops, restaurants, tradespeople and beauty salons are all prime examples.
Even if you’re happy to go without, your client contracts might require public liability cover.
Say you’re a fitness instructor (for example), dealing with the public on a daily basis. Need to lease a room to hold classes? You’ll probably have to show evidence of insurance. Signing up to teach a new class at the local gym? Chances are you’ll need public liability cover in place.
Even if you work from home, if you go to client meetings, attend trade shows or have customers visit your home (to name just a few examples!), you’re leaving your business at risk if you don’t have public liability insurance.
So in short, no. You don’t need both types of cover. But is it something you should consider? Absolutely yes.
What does public liability insurance not cover?
Public liability insurance doesn’t cover any claims by staff or former staff members.
Lots of people ask, does public liability insurance cover employee injury?
In short, no.
You might think once someone has left your company, they’re now a member of the public. So any claims would be covered by public liability insurance, right? Not so.
What about someone who’s just on a week’s unpaid work experience? Again, no.
It’s only employers liability insurance that covers you in case of employee personal injury or property damage. Public liability won’t cover you, no matter if the member of staff is paid or unpaid, on a short, long-term or freelance contract.
Check with your insurer exactly what’s covered and what’s not. You can find this in your policy documents or call for a chat. If you’re at all unsure about what’s covered and what’s not, it’s best to ask before committing to an insurance policy.
How much is public and employers liability insurance?
Prices for public and employers liability insurance vary massively, depending on the nature of your business and your insurance provider.
Just some factors include:
- The industry you work in
- The tasks you and your staff perform
- How many staff you employ
- Where you’re based
- Your annual turnover
- Your claim history
The level of cover you choose will also impact the price. For employers liability insurance, you’ll need at least five million as a legal requirement.
While there’s no legal requirement for minimum levels of public liability cover, your client contracts might specify a certain amount.
You can normally buy public liability cover and employers liability insurance from the same provider (like us at Howden). While there’s nothing saying you have to do this, a business insurance “package” will probably save you money.
Do labourers need public liability?
To round off, this is a question that crops up a lot.
Just like any other business, the only form of insurance a labourer needs is employers liability insurance. And this is only if you employ staff.
From a legal standpoint, you don’t need public liability insurance.
This doesn’t mean it isn’t advisable though.
Whether you’re fully self-employed or work as a subcontractor, you’re liable for your own work. If the worst happens and someone (whether a colleague or member of the public) is injured as a result of your business activities – could you face the costs of litigation and compensation claims? What if a part fails and a customer’s property is damaged?
For this reason, most labourers have specialist tradesperson liability insurance. Many also take out professional indemnity insurance as well, which protects businesses and tradespeople against claims resulting from the services they’ve provided.
In summary
The key difference between employers liability insurance and public liability insurance comes down to who’s claiming against your business. While employers liability insurance covers claims made by staff members (either present or ex-employees), public liability covers claims made by members of the public.
Public liability insurance isn’t compulsory. But it is advisable for businesses or self-employed people who work with the public in any way.
Employers liability insurance is compulsory if your business employs staff of any kind. The fines for not having valid employers liability cover are substantial – up to £2,500 per day.
Costs for employers and public liability insurance vary massively depending on the nature and size of your business, so it’s best to get a direct quote. Get in touch with our team of specialist advisors for tailored, personalised cover that protects your business.