Employers' liability insurance, who needs it and what does it cover?

There are so many things to remember when setting up a business and what with all the excitement and hullabaloo, there appears to be so little time to do them all. From writing a business plan and deciding on a business name to choosing a legal structure and finding suitable premises. Then there is the bank account to open, website to design, licenses to apply for, suppliers to source, contracts to sign and naturally, employees to recruit.

And then of course, there is the insurance – no yawning please – because although insurance is not the most exhilarating of topics it is probably one of the most essential to remember. There is no doubt that insurance is important in all walks of life but as a business owner you need to ensure your insured against all eventualities.

Depending on what type of business you own will determine what sort of insurance policy you need and although there are numerous types of business insurance available, here we will be looking at Employers’ Liability insurance.

What is Employers’ Liability Insurance?

This type of insurance, as the name suggests, will cover you as an employer should any claims be made against you by your employees for any injuries sustained as a direct result of undertaking work for, or within, your business. Employers’ Liability insurance will also protect you against claims made by any temporary staff, self-employed contractors, and volunteers.

Who needs this type of insurance?

As an employer you are responsible for the health and safety of your employees while they are at work and the vast majority of businesses, even if they only have one employee, are legally obliged to have Employers’ Liability insurance.

Exceptions to this rule are small businesses that only employ family members – although family businesses incorporated as limited companies must have Employers’ Liability insurance. Other exemptions include public organisations and health service bodies. Also, if you are the sole employee of your business you are not obliged to have cover but clients you carry out work for may insist you do. Failure to have Employers’ Liability insurance cover can result in businesses facing substantial fines – up to £2,500 per day until a policy is taken out.

A couple points worth noting here are that an employee can claim up to three years after the date of the accident and may no longer work for the company.

What does Employers’ Liability insurance cover?

A policy will cover your business against claims from any employees regarding injury, illness or damage resulting from their work. An incident where an employee trips over a computer cable may sound quite innocuous but at the end of the day, you as the employer can be held liable for any injuries. Other examples include slipping on a wet floor or contracting a disease. An Employers’ Liability insurance policy covers costs for defending and settling claims, including compensation payments and legal fees where necessary. You might have to purchase additional cover for students on work experience or freelancers.

How much does it cost and how much cover do I need?

The cost of your policy will depend mainly on the number of employees you have and the business sector you operate in. You must have Employers’ Liability insurance cover of £5 million, although if you think this is insufficient then you should calculate how much the most serious claim could cost and take out cover accordingly.

As the old adage says, accidents do happen, and compensation costs and legal fees can amount to a significant sum. Therefore, making sure your business is insured against all eventualities maybe one of the most important business decisions you will ever make.

To speak with one of our insurance experts regarding this subject or to get a quote, click here.