Liability insurance covers business owners, independent professionals and self-employed people against the cost of compensation claims following fault of negligence brought against them by employees, clients, customers, shareholders, investors, or members of the public.
Liability insurance usually covers the cost of compensation to a third party for personal injury or loss of (or damage to) property.
If you are an employer you are legally obliged to have employers’ liability insurance.
Other types of liability insurance are generally optional (with some exceptions).
The main types of liability insurance are:
- employers’ liability
required by law if you have employees – covers the cost of compensating employees who are injured at or become ill through work
- public liability
covers the cost of claims made by members of the public for incidents that occur in connection with your business activities
- product liability
covers the cost of compensating anyone who is injured by a faulty product that your business designs, manufactures or supplies
- professional indemnity
covers the cost of compensating clients for loss or damage resulting from services or advice provided by a business or individual
- directors’ and officers’ liability
covers the cost of compensation claims made against your business’s directors and officers for alleged wrongful acts
The insurance premium is generally based on:
- the type of liability insurance you are buying
- the type of business & risk requiring cover
- the claims history of your business
- factors specific to your business including the number of people you employ and/or your annual turnover