Managing Liability Insurance When You’re Self Employed

Being self-employed comes with a lot of freedom as well as responsibility. It means having more control over the hours you work, and holding yourself accountable for working those hours. It provides you with the ability to take on clients and expand your business on your terms. However, being self-employed also means assuming the risks and reputation of the business itself. As a contractor or small business owner, any negligence or accident caused by your actions can lead to a lawsuit that can cripple your business, your livelihood, and your brand. Fortunately, public liability insurance can shield you from the fees, expenses, and compensatory payments that result from such litigation.

How Public Liability Insurance Works

A basic public liability insurance plan covers self-employed individuals or contractors from any injury or property damage incurred by a third party. The personal injury portion aims to protect your business should any harm come to client due to your actions. This also includes any claims made by the NHS for hospital treatment. The property damage portion covers any damage to equipment or personal property, as well as the resulting cost to claimant should that property be vital to their daily operation.

For example, if an IT engineer were to spill coffee on a server and cause irreparable damage, the business would not only need to replace the server, but also be forced to suspend a significant portion of their operations while their network was down. The aggregate cost could escalate into the millions of pounds, which is why most small businesses and contractors must rely on insurance when such an incident occurs. In fact, in the UK many tradesman are required to have public liability insurance of £1 million, £2 million, or £5 million in order to legally conduct business. In short, public liability protects you against the following:

  • Lawsuits due to personal injury or property damage
  • Legal fees and expenses associated with a claim
  • NHS claims regarding hospital treatment and ambulance charges

Pros and Cons

Depending on your profession, the risk of a lawsuit may vary. For electricians, construction workers, and plumbers, public liability insurance may seem like an obvious part of operating a business. The opportunity for damage while working directly with a client’s property presents too great a risk to go without it. Similarly, hairdressers, massage therapists, and individuals who actively engage their customers and expose them to various products should also protect themselves with some form of insurance. However, for other professions, the risk may not appear substantial enough to justify the monthly premiums.

Nevertheless, a single incident is all it takes to induce a lawsuit that cripples your business. Simply meeting with a client and having them slip on a wet floor, or spilling a drink on their lap could provide grounds for a lawsuit. In addition, low risk generally translates to lower premiums, as most actuaries base their premiums on the likelihood of a claim being filed. Public liability insurance can also be packaged with other insurance options to provide more savings.

Moreover, having a reliable public liability insurance typically is an important part of creating trust between you and the client. Many clients will even refuse to do business with independent contractors that do not have an adequate public liability policy. The relatively low cost coupled with the peace of mind of having protection make having a strong public liability cover an important part of running a business.