Small business public liability insurance costs start from around £50 for less risky businesses and £500 or more for businesses involved in more dangerous types of work. But how much will your small business pay for public liability insurance? It depends on many factors, such as the business’s turnover, the line of work the business is engaged in and the amount of cover needed.
To learn more about how premiums can vary according to these metrics, we’ve read research about small business public liability insurance costs from NimbleFins to learn more. Here’s what we found.
What is public liability insurance?
Public liability insurance is a type of business insurance that protects against accidental injury or damage claims from third parties. For example, if a customer slips on a wet floor in business premises and is injured, they could sue the business. Third parties can include anyone who is not a part of the business, such as clients, customers, the landlord, vendors, delivery people and even passers-by.
Public liability is one of the most common types of business insurance. Any small business with physical contact with third parties should consider buying a policy, from restaurants to tradespeople to shops, and nearly everything in between. A business might not need public liability insurance if they only engage with customers or any other third parties remotely – for instance, a web design business that only works online.
Injuries to employees are not covered under public liability insurance. This type of risk falls under another type of business insurance called employers’ liability insurance. Employers’ liability insurance is the other most common type of business insurance, as it is required by law when a business hires workers (in most cases).
How much is liability insurance for a small business?
The cost of public liability insurance typically ranges from £50 to £500 or more for a small business, with most businesses paying around £120 a year. But prices vary widely depending on many factors such as the industry, size, limit of insurance and even the type of business structure.
The type of work a business does has a large bearing on their public liability insurance quotes. Why? Some occupations are simply riskier in a physical sense than others and are more prone to lawsuits. For example, a limited tutoring company might pay around £125 a year for £2M of public liability cover. On the other hand, prices can be much higher for more dangerous professions like a scaffolding business, which might pay north of £700 a year for the same protection. And riskier businesses might prefer a higher limit of insurance, which would mean an even higher premium.
However, while quotes do rise with the level of cover, businesses typically pay less for each additional million of public liability insurance. For example, £5M of cover in all certainty will cost less than 5X the price of a £1M policy. In fact, studies show that £5M of public liability insurance costs closer to 1.4X the cost of a £1M limit over cover in most cases. This is beneficial as it means a small business can opt for a higher level of protection without spending a fortune.
Another factor that insurers use when determining the cost of public liability insurance for a small business is the business structure. You may be surprised to hear it, but it’s cheaper to buy public liability insurance for a partnership than a limited company. And a limited company with just one director can be cheaper to insure than a limited company with two or more partners.
How much liability insurance does a small business need?
The amount of public liability insurance a small business needs depends on many factors, such as turnover and the type of work carried out. A company with a higher turnover might be subject to a higher claim payout, for example. And riskier businesses should carry a higher limit of insurance to protect against potentially higher claims as well.
For example, a self-employed accountant surely needs less insurance than a construction business. The physical risk of injury or property damage to third parties is clearly lower for an accountant than a building company. An accountant could be sued if a client trips on a loose piece of the carpet when walking into a meeting at the accountant’s premises, perhaps. But there are potentially many more risks for third parties on a construction site, from falling debris to unstable walking surfaces to the presence of sharp objects and dangerous tools and equipment.
In the UK insurance market, public liability is commonly available with a limit of cover of £1M, £2M or £5M. Specialist providers or brokers can help source alternate liability insurance levels, including higher amounts for a business that decides a larger limit is most appropriate. But the market is most competitive for the levels mentioned above.