What is employers’ liability insurance and do I need it?

If you work for yourself without staff, then employers’ liability insurance isn’t something you have to worry about for now. If you do have employees or you’re planning on hiring someone, then you need insurance.

Read on to find out: 

• What employer’s liability insurance is and what it covers
• Whether you need employer’s liability insurance 
• How much employer’s liability insurance costs 
• Possible policy exclusions

Employer’s liability insurance is one of the main types of insurance that businesses who have staff are legally required to hold. It’s a policy that covers costs, fees, medical expenses and possible compensation if one of your workers is taken ill or suffers an injury as a result of their job.

It can cover everything from the immediate, such as a shop worker slipping over on a wet floor and breaking their arm, to long-term, for example, asbestos exposure at work and a life-changing lung illness years later.

The policy will cover you for both current and former employees and will pay costs and compensation up to the value of your cover.

If you have staff, then yes, you do need insurance — it’s a legal requirement. By law you’re required to have cover up to £5 million or face a fine of £2,500 every day you’re without it. There are some exemptions for businesses that only employ very close family members such as your husband, wife, and even these will need insurance if they’re a limited company. To discover whether you’re exempt or not, it’s best to check the legislation and if in doubt at all, get legal advice.

You may not need employers’ liability insurance if the people you work with are freelancers and you’re contracting them to work for you on a particular job. For example, employing a carpenter to build a new counter in your shop. Ultimately, it depends on what the contractual arrangements say. You need to make sure you’re clear whether they fall under the definition of an employee or not. If in doubt, double check.

In practice, it’s better to err on the side of caution and take out insurance even if you’re not sure you need it. The cost of claims can be eye-wateringly high and the last thing you want is to find yourself in a situation where someone is considered an employee in the eyes of the law, has an accident, sues you and puts a hole in your business finances.

Most employers are required to have a policy with cover up to £5 million the moment they take on their first member of staff, although some insurers will start a standard policy at £10 million. In practice, the price of the premium and level of cover depends on the number of employees, the type of work and risk involved as well as the industry you’re in. For example, a tree surgeon is always going to carry more risk of injury than a secretary working in an office.

On average, if you’re a small business with just one or two employees, insurance is likely to be as little as £60 a year for a single office worker, to around £200 a year for a tradesperson.

Even if you’ve got the right insurance there are instances where your policy won’t pay out that you should be aware of.

1. Claiming within the time limit

If you don’t claim within the specified time limit on your policy, then the claim could be excluded completely. If you run a business where there is a risk of illness from exposure which doesn’t appear for months or even years, then it’s best to check this is covered.

2. Where motor insurance applies

You won’t be able to claim if injury occurred from a road accident. For example, where your employee uses a company vehicle for work purposes the law requires that you have a separate motor insurance policy that covers any employee injury or illness.

3. Where the injury or illness was deliberate

In this instance you will not be covered, and the situation may become one subject to the criminal law such as one employee attacking and injuring another. 

4. Where injury or illness happened offshore/abroad

Injury could occur in the course of a job on a fishing boat or an oil rig, for example. In those cases, there are all kinds of issues with jurisdiction, and it’s best to check with your insurer if cover will apply or if you need a specialist policy. 

If you have a staff member who works abroad, they won’t be covered.You’ll need to check what local laws or cover may be relevant in that country. If they’re permanently based abroad but spend 14 days continuously in the UK or seven days or more on an offshore location, then employer liability insurance is required and they will be covered.

You’re not legally required to keep expired policy documents but given that some illnesses can show up many years after exposure as is the case with asbestos and some other chemical-related illnesses, it’s a good idea to keep all your old certificates in a secure place.

If you can’t find them and your business is faced with a claim years later, you could end up having to meet the costs of that claim out of your own pocket.

You should also keep your current policy certificate on display in your place of work although since 2008 this can be displayed digitally. If you don’t keep it on display or you refuse to provide a copy if you’re asked to by the Health and Safety Executive, you could be fined up to £1,000. (Health and Safety Executive is a Government body that enforces health and safety at work. You are likely to be inspected if you work in a hazardous industry, if there is a specific incident, or there is evidence that your health and safety record is poor). 

Employer liability insurance is a necessary part of business admin if you take on staff, but it doesn’t have to be something that keeps you awake at night. Talk to your insurer, get the right level of cover in place and you can sleep easy knowing you and your staff are protected. 

With the right insurance in place, you can rest easy knowing that your small business is covered against the unexpected. To bring five star Trustpilot-rated cover to small businesses like yours, we’ve partnered with insurance provider Superscript. Click here to get a quote in minutes.