When you’re a new business owner, you won't necessarily know about all the different insurance types available to you. Two of the most common business insurance policies small business owners take out are professional indemnity and public liability. However, not everyone understands what the differences are between the two.
They are both policies designed to protect a business and its owners from the financial implications caused by a claim made against the business by a third party. However, their difference lies in what they cover and how they can protect a business.
Here is an explanation of the difference between the two types of insurance and why you need to speak to a business insurance broker about your specific requirements.
What is professional indemnity insurance?
Professional indemnity insurance
, also known as errors and omissions insurance, protects your business from claims made against you related to negligence from a client. Third parties, such as members of the public, cannot make a claim against you with this insurance.
The cover focuses on a failure to provide timely and accurate services and information. For instance, if you provide advice that leads to a client losing money, then they can make a claim against your small business. Or, if you provide some drawings that have inaccurate measurements that lead to a building/construction going wrong, you can have a claim made against you.
The insurance will offer the financial protection that will cover the compensation award to the claimant and any legal costs that are required to defend your business.
There might be times when you believe that your advice has not resulted in a loss for the client. In these circumstances, you can use professional indemnity insurance to defend your position in court.
It’s important to note that the customer/client does not need to pay for the advice in order to make a claim. If you run a free advice service or even a blog where you strongly suggest a course of action, then you could have a professional liability claim made against you.
What is public liability insurance?
Public liability insurance
covers your small business from any claim made against you by third parties who are members of the public. This can include any customers, suppliers or those not directly connected to the company (i.e. passers-by).
The insurance claims made against your organisation can include injuries caused by your actions, damage to property and any legal fees associated with the claim. These can be very costly and therefore, the financial safety of your business can be protected with this type of cover.
Examples of the claims that can be made include if a customer slips on the floor at your premises when it has recently been cleaned or if you accidentally damage equipment while trying to park your vehicle.
Public liability insurance is an important policy if you have any interactions with the public or go into public spaces. However, it’s particularly important if you own a shop, restaurant, are a tradesman or perform services for clients in-person (i.e. beauty treatments).
Public liability insurance does not protect you from claims made against you for digital crimes. So, if your computer is hacked or you’ve lost sensitive client data, public liability insurance will not protect you.
How much business insurance do we need?
The cover limits for both professional indemnity and public liability can be different. For professional indemnity, the cover limit is often under £5 million. Public liability insurance policies are usually less than £10 million.
However, you can get policies that have higher claim limits and it does depend on your own individual needs. You should also note that some jobs you undertake, certainly in some industries like construction and professional services, require you to have certain levels of cover.
Why you need to speak to an insurance broker?
When it comes to insurance, you should consider speaking to a qualified insurance broker. An insurance broker can be best placed to find the perfect mix of business insurance policies
for your organisation. They’re trained, qualified and legally obliged to give you the best advice that protects you from claims made against your organisation.
However, an insurance agent at an insurer isn’t legally allowed to provide you with advice about the insurance they sell. They’re only allowed to sell you the products. This can often mean that the insurance sold to you won’t provide the cover you require. Nor will it offer you the level of protection that you need.
Final word: the difference between public liability and professional indemnity liability
Both insurance products are important at protecting you from claims. However, you should consider whether you need to have both. To help you, you need to speak to a professional insurance broker
, who can advise you not only just on what cover you should have for your small business, but also the level of cover you need.
Professional Indemnity FAQs by Get Indemnity™
This guide is for information purposes and based on sources we believe are reliable, the general risk management and insurance information is not intended to be taken as advice with respect to any individual circumstance and cannot be relied upon as such.