What is employers’ liability insurance and why you might need it

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What is employers’ liability insurance?

If you have employees, employers’ liability insurance will cover you in the event that an employee decides to sue you for an accident they have had, or an illness suffered as a result of their work. For example, if an employee slipped and injured themselves in your office, or while they were working on your behalf outside the office or workplace, you could be liable for legal costs and compensation.

Why have employers’ liability insurance?
In most circumstances, employers’ liability insurance is a legal requirement for any business that has employees; even if you only employ one other person. However, there are some exceptions:

  • if you are a family business and only employ close members of your family you are exempt (although this exemption does not apply to family businesses incorporated as limited companies)
  • most public organisations, health service bodies, and some other organisations financed by public funds are exempt
  • limited companies where you, as the owner, are the only employee (and provide you own 50% or more of the company’s share capital

How much cover should I buy?
You are required to have cover of at least £5 million.

Do I need employers’ liability insurance for volunteers?
Depending on individual’s contracts and your existing cover, you may not need to buy additional cover for volunteers such as interns or students on work experience. Businesses that use independent contractors or freelancers to carry out work for them probably do not need to buy cover provided that the arrangement meets a number of criteria e.g. they do not work exclusively for you and you do not deduct income tax or national insurance.

What happens if I do not have employers’ liability insurance?
You can be fined up to £2,500 for every day you do not have cover, or £1,000 if you refuse to show your certificate of employer’s liability insurance to an HSE inspector.

More details on your obligations under the Employers’ Liability Act can be found from the Health and Safety Executive.

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