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What is the difference between Professional Indemnity and Public Liability

Public Liability Vs Professional Indemnity:

If you're a new business owner, you might not know about the different types of business insurance available. Professional indemnity and public liability insurance remain the most essential insurance products for small and medium business owners. Both insurance products are modelled to protect businesses and owners from financial losses resulting from clients and members of the public respectively.

What is an Indemnity claim?

An Indemnity claim is a legal claim by a party in response to financial loss or damage as a result of your business practices.

What Is Professional Indemnity Insurance:

Professional indemnity insurance protects you and your business from any claims brought against you by your clients due to professional negligence/wrong commitment/ faulty delivery, and more. 

This cover focuses explicitly on issues like the provision of timely and accurate services and information. So, for example, if you provided a piece of advice to your client and they incurred a loss from implementing it or if any that you delivered to your customer have inaccurate measurements which result in a mishap in construction, then you may have a claim made against you.

Professional indemnity protects you financially as it covers the claimant's compensation costs and the legal fees incurred in defending your business. 

Note: Your client doesn't have to have availed of any paid service from you to make a claim. Even a strong suggestion or free advice can cause a professional indemnity claim to be made against you.

Professional Indemnity Insurance typically covers the following:

  • Any professional negligence: It can be a poor piece of advice or any mistake in work delivered.

  • Breach of confidentiality: Sharing of confidential data without permission.

  • Violation of copyright: Using content from the web without the owner's permission.

  • Defamation: Defaming a competitor

  • Loss of goods

  • Loss of data/documents

What is not covered in PI insurance?

  • It does not cover claims made by the client before you take out the insurance

  • Claims that arise based on contractual liability

  • Copyright, patent, or trademark infringement

  • Claims that arise in regards to illegal trade.

  • Liabilities caused due to criminal, terrorist acts or nuclear perils.

Who needs professional indemnity insurance?

Companies and individual professionals need to protect themselves against potential claims made by unhappy clients. In addition, most service providers like doctors, lawyers, engineers, and advisers must have this insurance to protect them from any claims made by their clients due to errors in their service.

What Is Public Liability Insurance?

Public liability insurance protects you from any claims made against your business by a public member. It can be by any customer/supplier/ or by those not directly connected to the company.

This insurance cover will protect you from any expenses you incur due to claims made against you for any injuries, physical damage, property damage and any legal costs associated with defending yourself. These expenses can be costly, and therefore public liability insurance cover can protect you from any such unexpected losses at an unexpected time.

Claims can be made for scenarios like if any customer slips on the floors of your premises, is recently cleaned or if you happen to damage any equipment while parking your vehicle accidentally.

If you go to public places very often or interact with the public more, this policy is very important. It is particularly important if you own a shop or restaurant, are a business person, or perform any service in person.

Note: The public liability insurance does not cover you in case of claims made against you for digital crimes. So, you'll not be protected if your computer is hacked or any data is stolen.

The most common scenarios that PI insurance covers are:

  • Slips: For instance, if a customer comes to your place, slips on a wet floor and breaks an arm. They might claim you for the financial loss to be incurred in treating the arm.

  • Trips: Tripping over a loose wire and causing a sprain might lead to a compensation claim.

  • Falls: Falling and breaking a part of the body might lead to claiming rehabilitation costs.

What is not covered in PL insurance?

Though a PL insurance covers most cases, there are still a few exemptions- also known as exclusions as listed below:

  • Omission to perform any legal or contractual liability.

  • Any intentional non-compliance to safety and legal restrictions.

  • Physical, mental, and reputational damage.

Who needs public liability insurance?

  • Chemical manufacturers

  • Restaurants

  • Contractors

  • Educational Institutions

  • Hospitals

Benefits of PL insurance:

A PL insurance might not be a legal requirement but is necessary to safeguard your business from a financial drain that arises in a lawsuit. This insurance will cover legal expenses if any third party sues your company. Especially if your business frequently comes into interaction with third parties, this insurance is a must for you.

  • Protection against unexpected circumstances

  • You will be able to close more significant deals

  • Covered against data breach 

Are Public Liability Insurance and Professional Indemnity Insurance a legal requirement?b

Neither the public liability nor the professional indemnity insurance is a legal requirement. Businesses are legally obliged to have only one insurance for them: employer's liability insurance, which is suitable for any business hiring more than 1 or 2 employees. If you are your company's sole and only employee, you need not be covered by an employer's liability insurance.

Do I need PI or PL insurance?

Both offer different values, be it PI or PL insurance and can be recommended for different reasons. While neither of them is a legal must, having insured for Professional indemnity or public liability will give you peace of mind. In addition, if you do face any claims, this will keep you covered, or you will have to undergo a complete financial burnout due to legal proceedings and compensation payments.

How much does PL and PI insurance cost?

The cost of PI and PL insurance is based on various prediction factors on how likely you are to face a claim and how much that claim could amount to. When you calculate the premium for a public liability insurance policy, factors that will come under consideration are industry, size, nature and location of your business, your claims history, and the risk level. For example, your cover may cost more than that of a normal office-based business if it involves using dangerous types of equipment, experiences frequent visiting of public or is of a high turnover.

On the other hand, professional indemnity insurance is based on the level of insurance cover you choose to take. This can be determined by analysing the worst-case claim scenario and the maximum amount you need to pay as compensation/legal fees.

Get a quote from Smart Sure:

Smart Sure is an insurance solution/service provider established with a vision to bring a new approach to the consumer insurance market and towards the simplification of commercial insurance. Understanding the challenges that come along with running a business, Smart Sure's straightforward processing of commercial insurance for businesses helps a lot. With expert insurance advisers and a wide array of insurance packages, we help business owners make informed decisions about what they need.