Business liability insurance explained: public, employer's, and professional indemnity
Business liability insurance is not one product — it is three distinct covers that protect against different types of claim. Public liability, employer's liability, and professional indemnity each address a different risk. This article explains what each covers, which businesses need which, and the legal requirements.
The three business liability covers
Public liability (PL)
Recommended for most businessesCovers your legal liability if a member of the public — a customer, visitor, or bystander — is injured or their property is damaged due to your business activities. Not legally required but effectively essential for any business with third-party contact. Typical limits: £1–10 million.
Employer's liability (EL)
Legally required for employersCovers your liability if an employee is injured or develops a disease due to their work. Required by law for virtually all UK employers — minimum £5 million. Certificate must be displayed or made available. See liability cover.
Professional indemnity (PI)
Required for many professionsCovers your liability if a client suffers financial loss due to your professional advice, design, or services — errors, omissions, or negligent recommendations. Required by many regulatory bodies (FCA, SRA, ICAEW) and most professional contracts. See professional indemnity.
Which cover does your business need?
| Business type | PL | EL | PI |
|---|---|---|---|
| Sole trader, no staff, home-based | Recommended | Not required | If advice-based |
| Freelancer / consultant | Recommended | Not required (no staff) | Essential |
| Trades (plumber, electrician) | Essential | Required if employing | Sometimes required |
| Retail / hospitality | Essential | Required | Rarely needed |
| Professional services (solicitor, accountant) | Recommended | Required if employing | Legally required |
For a full comparison of public liability and professional indemnity, see our PL vs PI guide. For business interruption cover, see our business interruption guide.
Business liability FAQ
Frequently asked questions
- Yes — for almost all UK businesses that employ staff. The Employer's Liability (Compulsory Insurance) Act 1969 requires all employers to hold at least £5 million of employer's liability cover and to display the certificate of insurance at the workplace (or make it available electronically). Failure to hold the required cover can result in a fine of up to £2,500 per day. Limited exceptions include sole traders employing only close family members, and some public sector bodies. See liability cover.
- If clients or members of the public visit your premises (even a home office), or if you visit client sites, public liability insurance is strongly recommended. A client who trips on your doorstep or a delivery driver injured at your home studio can bring a claim. Even if visitors are rare, the potential claim costs are large relative to the premium. Many professional body memberships and contracts with clients now require evidence of public liability cover.
- Public liability covers physical injury or property damage caused to third parties by your business activities — it is about what you do physically. Professional indemnity covers financial loss suffered by a client due to your advice, designs, or professional services — it is about what you say or recommend. A consultant who gives faulty advice causing a client financial loss needs PI; a contractor who damages a client's property needs PL. Many businesses need both. See our guide comparing the two.
- There is no legal minimum for public liability, but £1 million is generally considered a minimum for a low-risk business. Most businesses take £2–5 million. Some contracts (with local authorities, NHS, or large corporates) specify a minimum of £5–10 million. Choose a limit that reflects the maximum likely claim against you — for a business working with expensive machinery or large construction sites, £1 million may be inadequate. See liability limit.