Employers Liability Insurance Explained

Employer liability insurance is a legal requirement for any business in the UK with employees. It protects your company against legal fees and compensation costs from claims made by an employee, and so it is a key type of insurance. This is especially true for employers in the construction industry because if an employee sustains an injury or falls ill due to their work for you, you could be held liable.

Read on to learn more about employer liability insurance and why it’s essential for your business.

Why do I need employer liability insurance?

When you employ staff, you are responsible for their health and safety. While you may do everything possible to prevent an employee from getting injured or falling ill, it can still happen. Even someone slipping over on a wet floor can lead to an expensive claim. By law, you are required to have employer liability insurance as soon as you employ someone, even if you have just one employee.

Anyone who works for you voluntarily, temporarily or part-time qualifies as an employee, even if they don’t have a contract. You may not require employer liability insurance if your only employees are relatives or someone who lives abroad.

What does employer liability insurance cover?

This type of insurance will cover any legal costs resulting from defending a claim against you as an employer and any compensation awarded to the claimant. It covers:

• Legal costs: Covers all the costs of defending or settling a claim made against you by an employee
• Medical bills: Will the costs of medical treatment for an injured or sick employee
• Compensation: If you lose a claim made against, employer liability insurance covers any compensation you’re required to pay
• Lost income: This type of insurance will cover any income that an employee will lose while unable to work
• Casual workers: It’s usual for casual workers to be covered by this type of insurance, but check the terms of your policy

How much employer liability coverage do I need?

It’s a mandatory requirement that your employer liability insurance policy covers you for at least £5 million.

The level of insurance coverage needed for employees depends on the risks involved in their work. If they work in hazardous environments, use dangerous equipment, or face more significant risks, you may need a higher level of coverage. It is important to consider the cost of the most severe claim you could potentially face when deciding on the coverage amount.

To ensure adequate protection for your employees, consider the following activities:

1. Conduct a risk assessment to identify potential hazards in the workplace. This will help you determine the level of coverage needed to protect your employees.
2. Provide appropriate safety training and equipment to minimise risks in the workplace. This can help reduce the likelihood of accidents and injuries.
3. Implement workplace safety policies and procedures to promote a safe working environment. This can include regular safety audits and inspections to identify potential hazards.
4. Consider purchasing additional liability insurance to protect your business from potentially costly claims. This can provide coverage for claims related to property damage, bodily injury, or other accidents that occur in the workplace.

These steps can help protect your employees and business from potential risks and liabilities. Remember to regularly review your insurance coverage and workplace safety procedures to ensure they remain up-to-date and effective.

Who is exempt from employers’ liability insurance?

While employers’ liability insurance is a legal requirement for most businesses in the UK, there are some exceptions:

• Some limited companies: A limited company that employs one person who also owns over 50% of shares of the business
• Sole traders: If you don’t employ anyone and work on your own, you don’t need employers’ liability insurance
• Public bodies: Most public organisations, such as government bodies and health services, have different types of insurance.
• Relatives: If all of your employees are direct family members, you don’t need to have employers’ liability coverage

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

Employers in the UK must have liability insurance to avoid a £2,500 fine for each day of inadequate coverage. The law covers volunteers, casual workers and subcontractors under your supervision. Failure to display or present your insurance certificate when requested can result in a £1,000 fine.

Activities that employers should undertake to ensure compliance with the UK employer liability insurance laws include:

1. Purchase Adequate Employer Liability Insurance: All employers must have insurance covering the cost of compensating employees for any injuries or illnesses in the workplace. Even self-employed individuals who hire workers are required to have employer liability insurance.
2. Verify Insurance Coverage: Verify that your employer liability insurance policy covers your employees, including volunteers and casual workers.
3. Display Your Insurance Certificate: Employers are required to display their insurance certificate prominently where employees can easily see it, or they risk a £1,000 fine.
4. Take Out Insurance for Subcontractors: If you employ subcontractors, you may be required to take out insurance for them if they are under your supervision.
5. Review Your Insurance Coverage Regularly: Review your insurance coverage regularly to ensure that you have adequate coverage for your employees and the risks associated with your business.

Employers should take these steps to ensure that they comply with the UK’s insurance laws.

How much does employer liability insurance cost?

The cost of employer liability insurance depends on several factors, such as the type of work, business size, location, and claims history.

1. Type of work: Employers in construction will pay more due to the increased risk of injury and illness.
2. Size of business: The number of employees and types of work can affect the cost of insurance.
3. Location: Operating in a high-risk area with a higher rate of claims will increase insurance costs.
4. Claims history: Previous claims and a poor health and safety record can result in higher premiums.

To minimise costs, businesses can take steps to reduce risk and prevent accidents. Comprehensive health and safety policies and training programs can help prevent workplace incidents, reducing claims and lowering insurance costs. Additionally, choosing a higher deductible can lower premiums, but businesses must weigh the potential savings against the risks of paying a more significant portion of a claim out of pocket.

Conclusion

In conclusion, employer liability insurance is essential for any business with employees, particularly those in the construction industry. It protects your company against legal fees and compensation costs arising from employee claims. The cost of employer liability insurance depends on several factors, including the type of work, business size, location, and claims history. By taking steps to reduce risk and prevent accidents, such as conducting risk assessments, providing appropriate safety training and equipment, and implementing workplace safety policies and procedures, you can help protect your employees and your business from potential risks and liabilities. It is essential to regularly review your insurance coverage and workplace safety procedures to ensure they remain up-to-date and effective.