Liability insurance

Employers' liability insurance

Employers' liability (EL) cover enables businesses to meet the costs of compensation and legal fees for employees who are injured or made ill at work through the fault of the employer. Employees injured due to an employer's negligence can seek compensation even if the business goes into liquidation or receivership.

By law, an employer must have EL insurance and be insured for at least £5 million. Most insurers automatically provide cover of at least ­­­­£10 million. EL insurance must cover all your employees in England, Scotland, Wales and Northern Ireland.

If your business is not a limited company, and you are the only employee or you only employ close family members, you do not need compulsory employers' liability insurance. Since February 2005, limited companies with only one employee, where that employee also owns 50 per cent or more of the issued share capital in the company, have also been exempt from compulsory EL insurance.

The HSE is responsible for enforcing the law on EL insurance. You can be fined up to £2,500 for each day that you do not have appropriate insurance.

Generally, someone is defined as your employee if:

• you deduct National Insurance contributions and income tax from the salary you pay them
• you control when, where and how they work
• they cannot employ a substitute when they are unable to work

Download a guide to employers' liability from the HSE website (PDF).

Useful checks

Your policy must be issued by an authorised insurer otherwise it will not be valid and you risk breaking the law. You can check that an insurance provider is a member of the Association of British Insurers (ABI) on the ABI website. Your insurance broker can also tell you which companies offer suitable EL policies.

When you take out a policy you will receive a certificate of employers' liability insurance. You must display a copy of this where employees can easily read it and keep copies for at least 40 years or risk a fine of up to £1,000. You need to make these certificates available to health and safety inspectors on request.

Subjects covered in this guide

• Introduction
• How liability insurance works
• Employers' liability insurance
• Public liability insurance
• Product liability insurance
• Pollution risk insurance
• Property owners' liability insurance
• Professional indemnity insurance
• Directors' and officers' liability
• Seek specialist advice

 

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