Employers’ Liability Insurance

Don’t Let Employers’ Liability Insurance Confuse You

Most employers in the UK are legally required to insure their employees against liability for property damage and injuries that occur during employment. Employers’ Liability insurance is designed to protect your business in the event of such a claim.

What is Employers’ Liability Insurance?

Generally speaking, employers are responsible for the health and safety of their workers. As such, if an employee is injured, made ill, or incurs damage to their personal property as a result of the employer’s negligence, they are entitled to pursue a claim against the business.

The Employers’ Liability Act of 1969 makes purchasing insurance mandatory for any business in the UK that has employees, provided the employees are based in England, Scotland, or Wales. This is true for both on and off site incidents, although accidents that occur in motor vehicles may be covered by your car insurance.

How Much Cover Do I Need?

All businesses must be insured for a minimum of £5 million, with larger amounts available for companies that assume more risk. Some policy providers offer varying amounts depending on the type of claim, such as £10 million for general claims and £5 million for rarer incidents like acts of terrorism. Cover will generally include:

  • Indemnity for legal fees – Employers’ Liability Insurance will handle the cost of fighting the claim and paying for all fees associated with the lawsuit, including any criminal prosecutions for offences relating to the Health & Safety at Work Act of 1974.
  • Medical fees including ambulance rides and payments to the NHS

It should be noted that some businesses are exempt from the law, such as public organisations, government agencies, local and police authorities and nationalised industries, National Health Service trusts, some publicly funded trusts and family businesses, although not all may fall under the exemption.

Who Does the Insurance Cover?

Part-time or contracted workers may be covered by your employers’ insurance plan. Typically, the insurance applies if you deduct income tax and national insurance from their compensation. You may not need to provide cover if your employees fall under any of the following categories:

  • Independent contractors who do not work exclusively for you
  • Employees who can employ a substitute if they are unable to work
  • You do not deduct national insurance or income tax from their pay
  • The employee works for their own personal benefit
  • Volunteers
  • Students on a work experience or unpaid internship program

However, given that accidents can occur regardless of their employment status, for these individuals, a separate cover called public liability insurance may be required.

What Happens If I Don’t Have Employers’ Liability Insurance?

The Health and Safety Executive (HSE) can send an inspector to verify if you have a policy of at least £5 million. An employer can be fined up to £2500 for any and all days they are without proper cover. Furthermore, failure to display a certificate of insurance, either with a physical copy or online, can result in fines up to £1000.

What Are the Costs?

The cost of employers’ liability insurance is largely dependent on the amount of risk associated with your business type. However, that risk will fluctuate based on your previous claims history, the amount of your excess, and changes in the market. Be sure to go over with your broker the various ways you can lower your premium and still remain covered for the areas that present the largest risk.