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

Being an employer is a huge responsibility.

If an employee is injured or unwell as a direct result of working for your business, they could claim compensation.

That is where employers’ liability insurance comes in – to protect you against these claims.

For this reason, it is compulsory for most employers to have a valid policy in place.

Here you can find out more about why this is, and how to choose the best insurance for your business.

What is employers’ liability insurance?

Employers’ liability insurance is a type of cover that protects your business against the financial burden caused by employees claiming compensation for an injury or illness caused by their employment.

It helps you pay for this compensation and it may cover your legal costs, too.

All employers have a duty to provide a safe working environment.

If employees or former employees suffer an injury or illness because they were unsafe at work, they are entitled to claim for compensation.

This payment could cover the cost of treatment, loss of income, other damages and legal costs.

To make sure businesses can afford to pay this compensation, the Employers’ Liability Compulsory Insurance Regulations 1998 have made it a legal requirement for employers to hold one of these policies.

Employers’ liability insurance is different from public liability insurance in that it specifically covers for claims made by employees and former employees, rather than the general public.

When might I need to make a claim?

Your policy will specify the times of claim it covers against.

Here are some common examples of employers’ liability claims:

• Suffering from an injury caused by faulty equipment
• Developing an illness from exposure to chemicals and other toxic substances, like asbestos
• Slips and trips caused by poor health and safety measures and inadequate training
• Injuries that result from poor posture because of a desk position

Even if the employee has not worked for you for a long time, they may still be able to claim compensation if they can link their health issue to your workplace.

However, there are some general exemptions that policies won’t cover you against, such as:

• Injuries or illnesses that happen when travelling (motor and/or travel insurance should be in place for this)
• Employees who work abroad
• Deliberate acts that cause illness or injury

Do I need employers’ liability insurance?

It is a legal requirement to have employers’ liability insurance if your employees fall into any of these categories:

• Full-time staff
• Part-time staff
• Volunteers
• Students (including work experience)
• Temporary workers

There are some exemptions for employers, including if:

• Your employees work oversees (but you should check local guidelines and requirements)
• Your employees are all direct members of your family (however, you may still want to take out a policy)
• Your business is a public organisation or government department – but do check to make sure

Deciding whether you need employers’ liability insurance becomes difficult if you have contractors or subcontractors.

It depends on your contract with each person and whether they are using your equipment, and you may want to get legal advice to double-check.

What happens if I don’t have employers’ liability insurance?

If you are legally required to have the insurance, you may be fined if you don’t have a policy in place.

The fine can be as high as £2,500 for each day you’re not insured.

You can also be fined if you don’t have your employers’ liability (compulsory insurance) certificate on display or ready when an employee asks to see it.

What is the employers’ liability insurance certificate?

When you take out a policy, your insurer will give you a certificate. It has information about your policy and what it covers.

You’re legally required to display this certificate somewhere that everyone can easily access in your workplace.

If you prefer not to have the hard copy on display, you could share a digital copy with your staff as long as everyone knows where to find it.

Insurers are now legally required to publish an employers’ liability insurance register, which shows the policies they offer and the companies that have taken them out.

Employees can search these to find their employers’ cover, and there are tracing offices to help employees find the insurer their employer used.

How much employers’ liability insurance do I need?

The minimum amount of cover required by law for employers is £5 million but you’ll often find policies with limits at around the £10 million mark.

You may also want to take out a policy that covers your legal costs, should you want to dispute a claim.

As well as employers’ liability insurance, you may want to take out public liability insurance and product liability insurance.

These cover against similar claims from the general public.

Other common insurances include key person insurance, business interruption insurance, professional indemnity insurance and cyber insurance.

You may be able to get a number of different types of business insurance under one policy, known as commercial combined insurance.

How much on average does employers liability insurance cost?

Your premiums will be based on your business’s level of risk, which depends on factors like how many employees you have, the nature of the work they’re carrying out, and the kind of equipment they are using.

As with taking out any insurance policy, you should compare like-for-like quotes.

A broker can do this for you, and they’ll recommend the exact policies and the amount of cover you need.