How liability insurance works
Calculating the cost of insurance using book and risk rating for public and products liability insurance.
The cost of insurance - known as the premium - is the price the insurer charges to accept your business. The premium charged by an insurer will depend on a number of factors, such as the nature of your business and the insurer's own experience of your business sector.
For most small to medium-size risks, the insurer will use a book rate, or average rate, which is based on the claims they have paid out to similar businesses. The insurer will use this rate to calculate the premium using a factor that reflects the amount of activity undertaken by the business. For employers' liability insurance, payroll is usually used to reflect the amount of activity. For public and products liability insurance, turnover is usually used.
The insurer may adjust the resulting premium to reflect positive features such as a good claims record or good risk management, or negative features such as a poor claims record.
See write a health and safety policy for your business.
Legal expenses insurance
Legal expenses insurance covers the cost of pursuing legal action or defending your business against legal action where this isn't covered by your liability insurance, eg in an industrial tribunal.
The insurer will pay fees and expenses for solicitors, barristers, accountants and expert witnesses, as well as court costs and opponents' costs if you are ordered to pay them in a civil court.