What is the purpose of employers' liability insurance? 

What is employers’ liability insurance?  

This is a type of business insurance that pays the damages, compensation, and legal costs if one of your employees, or ex-employees, claims compensation for a work-related illness or injury suffered as a result of working for your business.  

Must I have employers’ liability insurance?  

It is a legal requirement to have employers’ liability insurance if you employ anyone, even if it’s only one person.  

The policy must cover you for at least £5 million and come from an authorised insurer.  

Does it matter if the person working for me is a friend or self-employed contractor?   

You will need employers’ liability insurance if there is any sort of agreement between you and the person working for you, even if it is just a friend doing you a favour and there is nothing in writing.  

You must also be insured if your workers are:  

  • part-time employees
  • temporary staff
  • self-employed contractors
  • apprentices and volunteers
  • taking part in work experience or training schemes

The only circumstances that may not apply are where an employee is a family member or someone who is based abroad. You should always check with your insurance provider when faced with these situations.  

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

You can be fined up to £2,500 per day if you are not insured. You can also be fined for not displaying the insurance certificate or refusing to show an inspector a copy of your certificate.   

If an employee or former employee sues you, and you are not insured, the results could be a lot worse. Damages and compensation for sickness or injury can amount to thousands or even hundreds of thousands of pounds.  

If you don’t have insurance, your business will have to pay the amount awarded. You will also need to cover legal costs, manage the admin associated with court proceedings, and possibly attend court.  

The impact of these types of claims on small businesses can be devastating. Getting employers’ liability insurance will not just ensure you are legally compliant; it will also protect your business.