If you are considering a business insurance policy for yourself or your business, a question that may present itself is how do the policies differ? E.g.: What are the differences between professional indemnity insurance, Public Liability insurance and employers liability insurance?
More importantly, you’ll likely ask yourself which insurance policy is suitable for your needs?
Three of the most common business insurance policies, professional indemnity insurance, public liability insurance, and employers’ liability insurance all provide cover negligence claims. But it is in the type of negligence claim where the differences are apparent.
Simply put, Professional Indemnity insurance (PI) covers claims made by clients for alleged professional negligence or mistakes that have caused the client to suffer a financial loss as result of the work they do for you. PI covers you against claims from clients
Public Liability insurance (PL) cover claims made by members of the public for injury you are alleged to have caused to them or for property damage you are alleged to have caused. PI covers you against claims from members of the public.
Employers’ Liability insurance (EL) covers your business against claims of negligence towards your employees and their welfare which has resulted in an accident or illness alleged to have been caused as a result of the work they have done for you. EL covers you against claims from employees
Professional indemnity insurance will cover claims made by a client for professional negligence or mistakes made in the work you have done for them.
Professional Indemnity claims can be made due to perceived poor business advice, professional errors, defamation or libel and sub-standard work.
Professional indemnity insurance can cover the cost of legal defence, compensation payments, any additional costs for rectifying an issue and loss of income as a result of the claim.
The key difference between public liability and professional indemnity is that public liability covers for risks of injury or damage, whereas professional indemnity is focused on cover for professional errors and negligence causing financial loss.
Examples of causes of professional indemnity claims include: a creative design agency misprinting an advert for a client containing incorrect contact details so the client misses out on sales enquiries or a recruitment business accidentally forwarding on confidential client information or a business management consultant offering a client advice that causes their client to suffer a financial loss.
Public liability insurance covers claims of injury or property damage by a member of the general public against your business. This could include customers, clients, suppliers or passers-by.
Public liability insurance can also cover the cost of your legal defence, compensation payments, medical costs and loss of income as a result of the claim.
How does Employers’ Liability insurance work?
As one of the main types of business insurance, most employers throughout the UK are legally obliged to take out an EL insurance policy. The policy will pay your defence costs should an employee bring a claim against you as well as compensation for his injury.
For example, if a member of staff were to trip over a loose wire in an office space and be badly injured as a result, they may choose to sue for compensation as a result. In the case that your employee or former employee wins the case, you could be ordered by the court to pay compensation for injury, costs associated with their injury and even loss of earnings.
Your insurer will handle your claim so that compensation and any other legal fees you accrue can be paid for by your employers’ liability insurance.
If you are a freelancer, contractor or sole trader then EL insurance may not be necessary for your business. For clarity of this please call us for details on 0333 321 1403.
There are many different types of business insurance available, knowing which are right for you can be difficult to understand without expert advice.
Often you will find that a mix of policies will be applicable and necessary for your business.