Professional indemnity or public liability — which does a new business need?

The line between them

A structural engineer specifies a beam. The specification is wrong, the client rebuilds, and the client sues for the cost. That is professional indemnity: economic loss flowing from professional work.

The same engineer visits a site for an inspection and knocks a laptop off a desk, or a homeowner trips over equipment left in a hallway. That is public liability: injury or damage to a third party or their property.

The distinction is not always tidy — a design error that causes a structure to fail can produce both economic loss and physical damage — which is one reason the two policies are usually bought together and are best placed so they interlock rather than leave a gap.

The general comparison, in more depth, is here. This page is about which one a new business needs first.

Which do you need?

Professional indemnity, if a client can lose money because your work was wrong. Design, advice, specification, certification, assessment, reports, calculations, software, recruitment decisions, financial recommendations. If your output is judgement rather than a physical thing, this is your primary cover.

Public liability, if you are ever in someone else’s space or they are in yours. Site visits, surveys, inspections, client meetings, exhibitions, working in occupied buildings. Also if the public can be affected by what you do at your own premises.

Both, which is where most professional firms land. A consultant who never leaves their desk might genuinely need only professional indemnity. An engineer doing residential inspections needs both, and will usually find that clients and contracts require both by name.

Limits: they are not comparable numbers

A £1m professional indemnity limit and a £1m public liability limit are not the same kind of £1m. Public liability limits in the UK commonly start at £1m, £2m or £5m, and construction-related contracts often specify £5m or £10m. Professional indemnity limits are set by what a claim against your advice could cost, which for a small firm working on large projects can be a great deal more than its fee income suggests.

Check whether each limit is any-one-claim or in the aggregate, and whether defence costs sit inside the limit or on top. On a professional indemnity claim the defence costs are frequently the larger half, and a limit that has to absorb them is a smaller limit than it looks.

What contracts usually ask for

Construction and consultancy contracts commonly specify both, by name, with a minimum limit each and a requirement to maintain the professional indemnity for a period after completion — six or twelve years is typical language. A new business signing its first contracts should read that clause before agreeing the fee, because the cost of maintaining cover for twelve years after a job is a real cost of doing it.

Where a regulator sets minimum terms — solicitors, accountants, architects, financial advisers — those apply regardless of what a client asks for, and are usually the higher bar.

Employers’ liability, briefly

Different again, and for most UK employers not optional. The Employers’ Liability (Compulsory Insurance) Act 1969 requires cover for injury or illness suffered by employees. A company whose only worker is its sole owner is generally exempt, but that exemption ends as soon as anyone else works under your direction — including casual and short-term help. It is worth checking before you take someone on rather than after.

Frequently asked questions

Does public liability cover mistakes in my advice?

No. Public liability responds to injury and property damage, not to financial loss caused by professional work. That is what professional indemnity is for.

Does professional indemnity cover someone tripping over my equipment?

No. That is a public liability matter.

My contract asks for both. Can I buy one policy?

They are often arranged together and can sit on one schedule, but they remain distinct sections with their own limits and their own triggers. Make sure the evidence you give the client shows both.

Which should a new business buy first if money is tight?

Whichever matches your actual exposure and your contractual obligations. For an advice-led business with no site presence that is usually professional indemnity. For anyone regularly on other people’s premises, going without public liability is a poor gamble and frequently a breach of contract.

Do I need product liability too?

If you supply, manufacture or install physical goods, probably. It is a separate question from both of the above and worth raising at the outset.

Related reading: Insurance for a new business · PI vs public liability in depth · Cover before you start trading

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.