Any business owners may have missed or thought that there was no significance to their business of the recent announcement by the Lord Chancellor reducing the personal injury discount rate from 2.5% to minus 0.75%, effective 20 March 2017.
However, the change is so significant that it will affect all individuals and businesses by increasing insurance premiums for both motor and liability covers.
The irony following recently announced changes to the small claims limit – intended to lower insurance premiums – has not gone unnoticed.
Last year the establishment of FloodRe brought huge relief to households up and down the country as flood insurance for domestic properties was now to be made available throughout the UK – with a small number of exceptions.
However, the scheme introduction meant huge problems for business as any business premises, including mixed use such as pubs, retail with living accommodation and even buy to let houses were denied the benefits of the new arrangements.
When deciding on what insurance to purchase, its essential to assess the risks that could impact your business and make your decisions based on the most appropriate protection available to meet your requirements.
Two insurance covers that sometimes cause confusion are Public Liability and Professional Indemnity.Whilst both of these covers protect your business against legal action and compensation awards to third parties, they do provide different forms of protection in your business activities.
One of the key differences between the covers offered is around the nature of the work that you carry out. If a third party suffers injury or damage to their property as a direct result of any physical work you undertake then Public Liability would protect you, whereas Professional Indemnity would protect you for third party financial losses if the risk is linked to your professional duty when providing design, advice consultancy or a service for a fee.
What is Public Liability?
Public Liability protects a business against the financial risk of for death, bodily injury, disease or damage to property suffered by any third party as a result of your negligence. The levels of cover available normally start at £2 million although much higher limits are the norm.
Examples of when you would be protected by Public Liability Insurance;
- A carpet fitter accidentally breaks an antique vase while fitting a carpet.
- A visitor, trips over a trailing electric cable and breaks their leg.
- A plumber damages a pipe and water leaks causing thousands of pounds worth of property damage and means the business is unable to carry out work for several weeks. Please note defective workmanship – ie the damage to the original pipe – is NOT covered
Public Liability is not compulsory, however, it is becoming increasingly important that small businesses protect themselves from the risks that are presented when they come into contact with the public and other businesses and many firms make it a basic contract term that sub contractors and other businesses working on their behalf have adequate cover.
What is Professional Indemnity?
Professional Indemnity insurance covers your legal liability for the advice and design that you provide, on the basis that this advice, design is given in a professional capacity. Professional indemnity also ensures protection against liability for breach of professional duty that you may face when providing a service for a fee.
For example, if a client disputes the accuracy of advice that their Health & Safety Consultant has undertaken for them, professional indemnity insurance (or PI as it is more generally known) will cover the cost of defending any claim as well as paying any compensation or damages that are awarded up to the limit of indemnity selected.
Examples of when you would be protected by Professional Indemnity Insurance;
- A builder designs an extension for a customer but during construction major design flaws are discovered leading to it being demolished and work having to start again
- Tax advice given by an Accountant leads to the customer suffering financial loss
- An IT Consultant fails to monitor a customers network as agreed in their contract, leading to the system being hacked which loses them business and they are then sued
Professional indemnity insurance has always been regarded as essential cover for traditional professions such as accountants, solicitors or architects but now, IT Consultants, Consulting Engineers, PR agencies as well as businesses that test or certificate such as electricians or gas engineers — Knightsure have professional indemnity insurance solutions for many trades and professions.
Next time you buy your business insurance policy hopefully you can now more easily identify the risks and exposure facing you and your business. For more information without any obligation contact us on 01489 579926 or use the Contact form on this website
Who needs to Insure against Directors and Officers liability?
Some company directors think that this cover, called D&O for short, is only for large businesses.
The risk of arson, or fires that are set intentionally, has grown in recent years. It is estimated that over 30,000 buildings in the UK are deliberately set on fire every year, costing as much as £300 million.
It will be obvious from my article a few months ago that there was a serious threat that properties with the highest risk of flooding were in danger of being left high and dry without cover after years of