Do I need public liability insurance if my startup is all online?

29 January 2021

You have an idea for your startup, bounced it around a little, then a little more.  Friends and family think you are onto a winner and you are looking to share it with the world. We bet that insurance has not been high on your priority list, but there are good reasons you need to take out your first commercial policy. 

Public Liability is the one policy almost every business takes out, and with good reason.  The coverage is relatively inexpensive and it protects your business from potentially catastrophic financial losses. 

A question we’re often asked, is there a need for need public liability insurance if your startup is all online? You do. It doesn’t matter if you’re trading from a shopfront on the high street or a noisy corner of your lounge, Public Liability insurance is important and one of the most crucial policies for you to hold.

It helps to understand what Public Liability insurance is. In almost all cases ‘Public’ is bundled with ‘Products’ Liability and this combined offering is designed to respond to claims for compensation (such as a legal letter) made against you in your professional capacity for alleged (that’s important) or actual third party injury or property damage claims. 

What might that look like? It could be someone tripping over at your designated business premises (that would be a Public Liability claim).  Or your product causing harm when your customer is using it (a Products liability claim).  You might think the chance of either event occurring is minute, but consider this: it is possible that a claim (however spurious/fanciful/far-fetched) can be made against your business and the potential costs are uncapped.  And don’t think you’re protected by trading from home; under the law, you are a commercial entity and will be treated as one.

Here’s an illustration. Let’s imagine you have spotted a gap in the market for a particular design of water bottle. 

You have arranged for these bottles to be manufactured overseas, intending to import them to your home address and sell direct to your customers online or from a pop up space.  You sell a few bottles then receive a notification that one of the bottles had a sharp metal edge and injured a customer.  This customer incurred medical bills and has instructed a solicitor to recover their costs and seek compensation. 

Without an insurance policy in place to protect your interests, you are now negotiating on your own with a third party solicitor or funding legal bills from your own pocket to defend your position.  Should your claim be accepted under a Public and Products liability policy, this could settle the medical bills and the financial compensation, if that is ordered by a law court. 

Beyond a potential claim event, you may also require coverage to be able to set foot in a client’s premises or to simply enter into a contract with a company to provide services. This is an increasingly common request and one that is taken seriously by businesses. If you don’t have the required insurances, you don’t get the work.

We wish you every success in your venture. You are taking a huge leap into the exciting unknown and we are here to help with the safety net.