Is Public Liability Insurance The Same As Professional Indemnity?

By Kat Storr

Professional indemnity insurance will give you peace of mind and legal protection if you ever end up in a situation where you are sued by a client. This could occur if someone believes you made a mistake, were negligent when providing a service… Click To Tweet

Is Professional Indemnity Insurance The Same As Public Liability?

Tax, salaries and insurance – there’s so much to think about when starting out as a new business owner and no one can expect to know everything straight away. 

While the individual needs of every business are different, they will have some things in common. The majority will need to be covered by business insurances of some kind. Two of the most common types are professional indemnity insurance and public liability.

Both of these policies offer protection from compensation claims by a third party, but beyond that similarity, they are quite different.

In this article we’ll look at what both public liability insurance and professional indemnity insurance are, how they can protect your business if things do go wrong, and if you need one or both.

What is professional indemnity insurance?

When setting up your business, it’s important to take steps to make sure you’re prepared for any scenario which may negatively impact your reputation, finances and employees. 

The types of claims professional indemnity insurance covers include:

  • Professional negligence or a breach of a duty of care
  • Defamation
  • Breach of confidence
  • Breach of copyright
  • Lost or damaged documents

While you might feel reluctant to spend money in the initial stages of building your company, the value of having financial protection is undeniable. 

Professional indemnity insurance will give you peace of mind and legal protection if you ever end up in a situation where you are sued by a client. This could occur if someone believes you made a mistake, were negligent when providing a service or offered bad advice which caused them to lose money. 

Professional indemnity insurance should ensure you can cover the cost of defending yourself in court and hopefully resolve any dispute. 

Members of the public can’t take action against you with this type of insurance. However, it is important to note that even if a person has not paid for advice provided by you, they could still make a claim. An example of this is if you wrote a blog defaming someone or gave free online financial advice which led to them losing money. 

Who needs professional indemnity insurance?

The Association of British Insurers (ABI) states that business owners who “offer skills, knowledge or advice” should take out professional indemnity insurance. This could include a range of professions, from journalism and architecture to graphic design and accounting. 

There are also a number of professions where your industry body or regulator may require you to take out professional indemnity insurance before you can take on work. These include:

  • Solicitors
  • Architects
  • Chartered surveyors
  • Accountants 
  • Financial advisers
  • Some healthcare professionals 

How is public liability different to professional indemnity insurance in the UK?

Public liability differs from professional indemnity insurance because it’s related to injury or damage claims made against you by third parties who are members of the public. The ABI defines ‘public’ as “anyone who is not your employee, including people visiting your business, people taking part in your activities, and people watching activities you have organised”.

As we stated above, these claims could be related to an injury, illness or damage that has occurred in connection with your business. This could be an accident on your premises or if a customer is taking part in an activity organised by your business. It also covers damage to other people’s property. A public liability insurance policy will cover compensation payments for any of these issues, while also protecting your business’s finances. 

It’s not usually compulsory to have public liability insurance, but many companies will insist that you have cover in place before working with you as a supplier or contractor. Obviously, if you choose not to have this type of insurance, you’re risking a loss of earnings and putting yourself at risk of having to foot the bill if a claim is made against you.

Should I have both types of insurance?

It depends on your business. Most companies will benefit from professional indemnity insurance, but fewer need personal liability insurance as it tends to apply to companies who allow non-employees onto their premises or who work with the public in one way or another. 

However, as they both do completely different things, it’s not an either/or situation, so some businesses will need both.

How can I find out more?

If you’re researching professional indemnity insurance companies, FinEdge can help you find a product for you and your business. Our trained insurance brokers are industry experts who can answer all of your questions. Request a call back for a no-obligation chat between you and one of our brokers today.