Is employers' liability insurance compulsory?

What is employers’ liability insurance?

It is a type of business insurance. It covers your business if you are sued by an employee or former employee for an injury or illness suffered as a result of working for you.

Accidents happen, and the cost of a claim can be substantial – reaching thousands of pounds or more.

A successful claim could include compensation for the injury or illness, lost earnings, and legal fees.

What sorts of businesses need cover?

It doesn’t matter what type of business you have (i.e. whether you are a limited company, partnership or sole trader), the sector you work in, nor the size of your business. If you employ anybody, you need to be insured.

Must I have it?

You are legally required to have employers’ liability insurance if you are an employer.

If you don’t have cover, you can be fined up to £2,500 a day. For not displaying your insurance certificate or not producing it when requested by an inspector, you can be fined £1,000.

You should display your insurance certificate somewhere that is visible and accessible by your employees, such as on a staff noticeboard.

Which employees count, for insurance purposes?

All employees, including part-time staff, trainees and apprentices, and volunteers.

In some cases, it may also include sub-contractors. If you use sub-contractors, you may need professional help to work out whether they are legally considered employees. The difference is not always clear cut.

Are there any exceptions?

If you employ a close family member, or if the person you employ lives overseas, insurance may not be needed. However, you should still check.

How much cover is needed?

You are required to have cover of up to £5 million. However, most standard employers’ liability insurance policies will provide cover up to £10 million.