Looking to arrange this cover rather than read about it? This article explains how it works. For cover levels, what affects the price and a quote, see employers' liability insurance.
Employer's liability insurance is a legal requirement for most UK businesses with employees, covering claims for work-related injuries or illnesses. Failing to hold this insurance can result in fines and significant financial liabilities, making it crucial for small businesses to understand their obligations.
Understanding Employer's Liability Insurance
Employer's liability insurance covers the costs associated with employee claims of injury or illness due to their work. In the UK, businesses with one or more employees must have this insurance, with a minimum cover of £5 million.
Legal Requirements for Small UK Businesses
Under the Employers’ Liability (Compulsory Insurance) Act 1969, most businesses must hold employer's liability insurance. This applies to businesses employing staff, whether full-time, part-time, or temporary. The insurance must cover at least £5 million, though higher limits are often advisable.
Who Needs Employer's Liability Insurance?
Businesses employing staff need employer's liability insurance. Exceptions include sole traders without employees, family businesses where every employee is a close relative (this exemption does not apply if the business is a limited company), and limited companies whose only employee is the owner, where that person holds 50% or more of the shares. If your business involves any form of employee, even casually, you need this insurance.
What Does Employer's Liability Insurance Cover?
Employer's liability insurance covers legal costs and compensation payments if an employee sues for a work-related injury or illness. This includes medical costs, lost wages, and other damages awarded by a court.
Common Claims Covered
- Injury at Work: Falls, equipment accidents, or repetitive strain injuries.
- Illness: Conditions like asbestos-related illnesses or stress-induced conditions.
- Legal Costs: Costs associated with defending a claim in court.
Exclusions to Be Aware Of
The cover is for injury or illness arising from the person's work for you, so it does not respond to injuries unconnected with that work, and each policy wording sets out its own exclusions. HSE guidance says volunteers and unpaid students on work experience are usually covered under an existing employers' liability policy, but it is worth checking with your insurer when you take them on.
Choosing the Right Policy for Your Business
Consider the nature of your business, risk levels, and employee numbers. A broker like CoverTrade Insurance Services can help identify a policy that fits your needs.
Factors to Consider
- Business Size: Larger businesses may require higher coverage limits.
- Industry Risk: High-risk industries like construction may need additional cover.
- Claims History: A history of claims can influence your premium costs.
How to Compare Policies
Compare policies by coverage limits, exclusions, and premium costs. Consider the insurer’s reputation and claims handling process. Using a broker can simplify this process.
Employer's Liability Insurance and Related Covers
Employer's liability insurance is often part of a broader business insurance package. Pairing it with other covers like commercial combined insurance can provide a more extensive range of cover, including property damage, business interruption, and public liability.
Complementary Insurance Products
- Public Liability Insurance: Covers claims from customers and members of the public for injury, or damage to their property, caused by your business, whether on your premises or elsewhere.
- Professional Indemnity Insurance: Protects against claims of professional negligence.
- Tradesman Insurance: Tailored for tradespeople, covering tools, equipment, and liability.