Most UK businesses need at least one type of insurance by law, and most commercial contracts require more than the legal minimum. This guide covers the three covers that come up most often — employers' liability, public liability and professional indemnity — what drives their cost, and what actually happens when you claim.
Key takeaways
- Employers' liability insurance is a legal requirement for almost any business with staff — you can be fined per day without it.
- Public liability is not legally required but is expected by most landlords, clients and commercial contracts.
- Premiums are driven by trade classification, claims history, turnover and headcount — not just cover limit.
- Under-declaring your turnover or activities to lower your premium can result in a claim being reduced or refused.
- Renewal is the natural time to re-benchmark, but a mid-term review is worth it after any major change to the business.
Which covers are legally required?
| Cover | Legally required? | Typical trigger |
|---|---|---|
| Employers' liability | Yes, for most businesses with staff | Employee injury or illness caused by work |
| Public liability | No, but often required by contract | Member of the public injured, or property damaged |
| Professional indemnity | No, but often required by regulator/client | Claim of professional negligence or bad advice |
| Product liability | No, but often required by contract | Injury or damage caused by a product you made or sold |
How premiums are actually priced
Insurers price on your trade classification (what your business actually does), your claims history, turnover, number of employees, and the cover limit and excess you choose. Two businesses in the same sector can see very different premiums if one has a clean claims record and an accurate trade description and the other does not.
Accuracy beats a lower quoted number
Under-declaring your turnover or activities to get a cheaper quote is one of the most common reasons a claim is later reduced or refused. Insurers verify the details you gave at the point of a claim, not just at renewal — get the numbers right upfront.
Choosing your cover limit
Liability policies are sold with a limit per claim — commonly £1 million, £2 million, £5 million or £10 million. Many commercial contracts specify a minimum limit before a client will engage you, so check your contracts before assuming a lower limit will do. Buying far more cover than your contracts require or your realistic risk justifies is one of the most common ways businesses overpay.
When to review your policy
- At renewal — the natural point to re-benchmark against the market.
- After a change in turnover or headcount — your existing limits and premium may no longer reflect your actual risk.
- After moving premises or changing activities — an outdated policy can leave gaps exactly where you need cover.
- After a claim — worth checking whether your premium and terms still make sense once your claims history has changed.
See if your business insurance is competitive
Send us your renewal documents and we will benchmark your cover against the whole market — same cover, or better, for less.
Compare business insuranceFrequently asked questions
Is business insurance a legal requirement in the UK?+
Employers' liability insurance is a legal requirement for almost any business with staff, with fines for each day you trade without it. Public liability and professional indemnity are not general legal requirements, but are frequently required by landlords, clients or professional regulators.
What is the difference between public liability and employers' liability?+
Employers' liability covers claims from your own staff for injury or illness caused by their work. Public liability covers claims from members of the public or other businesses for injury or property damage caused by your business activities.
Why did my business insurance premium go up at renewal?+
Common reasons include a claim in the past year, an increase in turnover or headcount, a change in your trade activities, or a general market-wide rate increase in your sector. Re-benchmarking at renewal is the way to check whether the increase is fair.
Does a low premium mean worse cover?+
Not necessarily — but it is worth checking the cover limit, excess, and any exclusions alongside the price, not just the premium in isolation. The cheapest policy on paper can work out more expensive if a claim falls into a gap in cover.
About this guide
The mybusinessdeals energy team benchmarks UK business gas and electricity contracts against the whole market.