Public liability insurance vs employers' liability explained

Public liability insurance pays compensation and legal costs if a member of the public, or another business, says your work or premises injured them or damaged their property. Employers' liability insurance does the same for claims from your own employees who are injured or made ill through their work. Professional indemnity insurance covers claims that your advice, design or professional service caused a client a financial loss.

Only one of these is compulsory for most businesses. Under the Employers' Liability (Compulsory Insurance) Act 1969, most employers in Great Britain must hold employers' liability insurance of at least £5 million. HSE describes public liability insurance as generally voluntary. Professional indemnity is compulsory for some regulated professions, but not for everyone.

The three covers side by side

	Public liability	Employers' liability	Professional indemnity
Who claims	Members of the public, customers, other businesses	Your employees and former employees	Clients who relied on your work or advice
Typical claim	A customer trips over a cable on your premises; you damage a client's floor	A worker is injured on site, or becomes ill from work years later	A design error, wrong advice or a missed deadline causes a client a loss
Compulsory?	Generally voluntary, though contracts may require it	Yes, for most employers in Great Britain	For some regulated professions
Legal minimum	None set by law	£5 million	Set by the relevant regulator, where required

Employers' liability: the compulsory one

Section 1 of the 1969 Act requires every employer carrying on business in Great Britain to insure, and keep insured, against liability for bodily injury or disease sustained by employees and arising out of their employment. The Act extends to England, Wales and Scotland.

What HSE's guide says employers must do:

Hold at least £5 million of cover with an authorised insurer. The £5 million includes costs, and HSE notes that in practice most insurers offer at least £10 million.
Display the certificate where employees can easily read it. Since 1 October 2008 you can display it electronically, as long as employees know how to find it and have reasonable access.
Cover employees normally based in Great Britain, including on offshore installations. Employees normally based abroad who spend more than 14 days continuously in Great Britain also need cover.

Who is exempt

HSE lists exemptions including:

most public bodies, such as government departments and local authorities, and NHS bodies, including Scottish health boards
family businesses where all employees are closely related to you, such as a spouse, civil partner, parent, child or sibling. This exemption does not apply if the business is a limited company.
companies employing only their owner, where that person owns 50% or more of the issued share capital

Who counts as an employee

The law covers people employed under a contract of service or apprenticeship, and HSE says the label you use doesn't decide it. You may need cover for someone if you deduct tax and National Insurance, control where, when and how they work, supply their materials and equipment, or they can't send a substitute. You may not need it for someone genuinely running their own business who supplies their own equipment and can send a substitute.

HSE says students working unpaid, people on training schemes and work experience pupils are usually covered under an existing policy, but suggests talking to your insurer if they are with you for long periods or doing work outside your usual business. Domestic staff who work only for you may need cover; a cleaner or gardener who works for several households generally won't.

Penalties

According to HSE:

you can be fined up to £2,500 for every day you are without suitable insurance
you can be fined up to £1,000 if you don't display the certificate or refuse to show it to an HSE inspector

Keep old certificates

There has been no legal requirement to keep out-of-date certificates since 1 October 2008. But HSE strongly advises keeping a complete record, because some work-related diseases appear decades after exposure. Without the details, you could end up meeting an old claim yourself.

What the insurer can't do

HSE explains that an employers' liability insurer can't refuse to pay compensation purely because you failed to protect employees, didn't keep specified records, admitted fault or didn't report the incident as told. It must pay the full amount agreed or awarded. However, the policy may let the insurer recover its costs from you if a breach of your legal duties led to the claim.

Public liability: generally voluntary, often expected

HSE describes public liability insurance as generally voluntary. It covers claims made against you by members of the public or other businesses, but not claims by your employees. Even so, a customer, venue or landlord may ask for proof of it, sometimes with a minimum limit, as a condition of a contract, so read what you sign.

Questions worth asking about any public liability policy:

Does the business description match everything you actually do?
Are any activities excluded that you carry out, such as work at height or with heat?
Does it cover liability you have agreed to in a contract, or only what the law imposes?
If you sell or supply goods, is products liability included?

Professional indemnity: for advice and expertise

The FCA's factsheet defines professional indemnity insurance as liability insurance that covers businesses when a third party claims to have suffered a loss, generally as a result of professional negligence. It is about financial loss from your work or advice, not physical injury or damage.

It is compulsory for some:

The FCA requires certain regulated firms, including financial advisers, mortgage intermediaries and general insurance brokers, to hold it.
The Health Care and Associated Professions (Indemnity Arrangements) Order 2014 makes an indemnity arrangement a condition of registration for health professionals including doctors, dentists, nurses and midwives, pharmacists, opticians, osteopaths and chiropractors.

If you belong to another professional body, check whether it sets its own requirements.

What changes the cost

Insurers price liability cover on factors such as your trade, turnover, wage roll and number of employees, the type of work and where it is done, the limit of indemnity, claims history and any high-risk activities.

Gaps and advised sales

Liability policies only cover what is described. In one ombudsman decision about a business's vehicle cover (DRN-2526712), a broker that had sold a policy on an advised basis was found at fault for not identifying a significant gap in cover. If a broker is advising you, it should consider how your business actually operates. If you buy without advice, the job of checking the fit falls to you.

What to check in your policy

Employers' liability limit: at least £5 million, and the companies named on the certificate
Certificate displayed where employees can access it, electronically or on paper
Business description and activities on the schedule match what you actually do
Public liability limit of indemnity against what your contracts require
Excluded activities: heat, height, depth, demolition, work abroad
Products liability: included or separate?
Professional indemnity: limit, whether it is on a claims-made basis, and any run-off cover after you stop trading
Labour-only subcontractors and temporary staff treatment
Excesses, especially for property damage claims
Old certificates kept on file

When to talk to a regulated adviser

An FCA-regulated commercial insurance broker can recommend limits and cover for your trade, and check whether a contract's insurance requirements are met. If you are unsure whether someone counts as an employee, HSE suggests taking legal advice. Vans used in the business have their own considerations: see van insurance explained.

Not sure what yours says? Upload your business liability documents and we'll show you the cover, the exclusions and the conditions, with the wording behind each.

Check my policy

Common questions

Is public liability insurance a legal requirement?

Not generally. HSE says public liability insurance is generally voluntary, unlike employers' liability insurance, which is compulsory. A client, landlord, venue or local authority may still ask you to hold it as a condition of a contract or booking, so check any agreements you sign. A professional body you belong to may also set its own rules.

Do I need employers' liability insurance if I only have one employee?

Usually yes. Most employers in Great Britain must hold employers' liability insurance for anyone employed under a contract of service or apprenticeship, regardless of how many. There are exemptions, such as family businesses where all employees are close relatives (unless incorporated as a limited company) and companies whose only employee is the owner holding 50% or more of the shares.

How much employers' liability cover do I need?

The legal minimum is £5 million. HSE points out that the £5 million includes costs, that most insurers offer at least £10 million in practice, and that it is worth looking at your own risks to decide whether more is needed. A group of companies can take out one policy, but the group as a whole must have at least £5 million.

What are the penalties for not having employers' liability insurance?

HSE enforces the law and its inspectors can ask to see your certificate. According to HSE, you can be fined up to £2,500 for every day you are without suitable insurance. If you don't display the certificate, or refuse to make it available to an inspector, you can be fined up to £1,000.

What is professional indemnity insurance and who needs it?

The FCA describes professional indemnity insurance as liability insurance that covers a business when a third party claims to have suffered a loss, generally as a result of professional negligence. It is compulsory for some regulated firms, such as financial advisers, mortgage intermediaries and insurance brokers, and health professionals must have an indemnity arrangement as a condition of registration.

Do self-employed contractors count as my employees?

It depends on the real working relationship, not the label. HSE says you may need employers' liability cover for someone if, for example, you control where, when and how they work, supply their equipment, deduct tax and National Insurance, or they can't send a substitute. Someone genuinely in business on their own account, supplying their own equipment, may not need to be covered.

Sources

HSE: Employers' Liability (Compulsory Insurance) Act 1969, a brief guide for employers (HSE40 rev4) checked 2 Oct 2026
HSE: Employers' liability insurance (HSE40 landing page) checked 2 Oct 2026
legislation.gov.uk: Employers' Liability (Compulsory Insurance) Act 1969, section 1 checked 2 Oct 2026
FCA: Factsheet 027, Buying professional indemnity insurance checked 2 Oct 2026
legislation.gov.uk: Health Care and Associated Professions (Indemnity Arrangements) Order 2014 checked 2 Oct 2026
Financial Ombudsman Service: Decision DRN-2526712 (business cover gap on an advised sale) checked 2 Oct 2026

This guide is general information about how insurance works in the UK. It isn't advice and doesn't take your circumstances into account. Policies differ: your own policy documents are what count.

Public liability, employers' liability and professional indemnity, explained