All businesses need insurance to protect them against unexpected losses. Their property could be damaged or stolen. Compensation claims could be made against them.
Insurance means that in the event of these things happening, the unexpected losses are covered so the impact on the business is minimised.
Public liability insurance
If you’re not sure what public liability insurance is, it covers you if a compensation claim is made against you because someone believes that due to something you have done or failed to do, they have been injured or their property has been damaged.
This type of insurance is particularly important for PAT testers because PAT testers come into contact with people and work on other people’s premises on a regular basis, meaning the risk of a compensation claim is increased.
Compensation claims can be expensive to settle. Some claims for injuries can result in compensation awards as high as £250,000.
As well as covering any compensation awarded, public liability insurance also covers any associated costs such as the claimant’s lost wages and other expenses. If the claimant has incurred travel costs to attend hospital appointments, for instance, those would be covered.
The legal fees are also covered. Importantly, your insurer will have a legally trained team that specialises in handling compensation claims and that team will handle the claim on your behalf. This means you would not need to deal with solicitors or get involved in potentially complex legal arguments.
Professional indemnity insurance
Professional indemnity insurance is similar to public liability insurance in that it covers compensation claims, but rather than covering claims that arise from something that you do or fail to do, it covers claims arising out of professional negligence.
As with public liability insurance, professional indemnity insurance covers not just the compensation awarded against you, but also any legal fees. The insurer will handle the claim on your behalf.
Unlike public liability insurance, professional indemnity insurance is usually on a “claims made” basis which means that, rather than covering incidents that occur during the period of insurance, it covers claims made against you during the period of insurance, even if the claim relates to something that happened at an earlier time.
Because compensation claims can be made years after whatever it was that led to the claim happened, it’s important to check that your professional indemnity insurance covers prior acts.
You should also bear in mind that even if you cease trading, a claim could still be made against you. Any such claims would not be covered if you have cancelled your professional indemnity insurance, but many professional indemnity insurers will allow you to buy “run off” cover which covers you for claims made against you that arise from any activities before you ceased trading.
Is insurance a legal requirement?
The only type of insurance that is a legal requirement is employers’ liability insurance if you employ anyone, and motor insurance if you are using a vehicle. All other types of insurance are optional.
However, often companies that you are working for will insist that you have public liability and professional indemnity insurance before they will allow you onto their premises. As such, if you don’t have these types of insurance you could be limited in terms of which jobs you were able to take on.
Of course, even though most insurance isn’t required by law, it can still be short-sighted to trade without it. A large compensation award could cripple a business if the business was uninsured. Similarly, if you couldn’t afford to replace any business equipment that was damaged or stolen because you didn’t have property insurance it could be a major problem because you’d be unable to trade.