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Go on admit it – chances are you don’t know the difference between professional indemnity and public liability.

You are not alone. Lots of people are kept awake at night pondering this thorny issue.

Okay, maybe not, but it is important.

Knowing which is which and how they can safeguard your business really is worth knowing.

Here’s our rundown of this key pair of policies:

Professional indemnity insurance

This cover is primarily designed to cover you in the case of making a mistake in your work. It’s designed to offer protection to any business that gives advice, handles client data or deal with intellectual property.

If your client accuses your company of affecting their business, even if you haven’t done anything wrong, the cost of defending yourself against a claim could become eye wateringly high. This is where good professional indemnity insurance comes into its own: covering legal costs as well as compensation claims up to the limit of your policy.

How much cover do I need?

It can be difficult to estimate how much cover you need, think about your clients; imagine the financial loss they could suffer if something went wrong. It’s possible for any business to make a mistake and even if you think the advice you’ve given is watertight, it could later turn out to be faulty.

Cover limits for PI insurance usually starts at £50,000 and can go as high as £5 million.

What is public liability insurance?

Public liability insurance is the most common type of insurance taken out by small businesses, but with a range of cover options available, it's just as well-suited to larger firms.

Public liability insurance generally covers your business if someone is injured in some way by your business, or if you damage third party property when carrying out work. Bear in mind that even a minor scratch to personal property could lead to hefty fines, especially as you could be required to pay legal fees if the case goes to court, and these too will be covered by your policy.

Just because you run a small business don't assume you will be safe without public liability. Something as simple as a coffee spill over a client's computer, or a loose nail causing a customer to trip while visiting your office, could cost you thousands if you're uninsured.

When taking out public liability insurance, you need to tell your insurer what type of business you are. This will help you come to an agreement over the type of policy best suited to you.

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