With so many different types of business insurance available, it can be hard to know which policies your business actually needs.
Perhaps the most important policy is employers’ liability insurance. It’s essential to know whether or not you need this particular cover but it is safe to say that most businesses with any employees are required to have it by law.
Employers’ liability insurance covers the cost of any compensation and associated legal fees that may arise from an illness or injury an employee suffers in the course of their work. It can also cover death. As a result, it can offer protection to both employers and employees should something go wrong during their working day.
Read on to find out whether you need employers’ liability insurance or not.
Is employers’ liability insurance a legal requirement?
According to UK law, any business with one or more employees needs to have employers’ liability insurance. Businesses need to have at least £5 million worth of cover, but many insurers will offer to cover more than this.
Limited companies with directors that own less than 50% of shares in the business will also need employers’ liability insurance. For example, if two directors own a company 50:50, they won’t need insurance. If, however, shares are split 75:25, the director owning the smaller share of the business would be considered an employee and would need to be covered by employers’ liability insurance.
There are some businesses that won’t need this cover, which is explained further in the next section.
If you’re meant to have employers’ liability insurance but don’t, you could be fined £2,500 a day for each day you don’t have the cover.
Any business that has employers’ liability insurance will receive a certificate showing it has cover. If a business doesn’t make this certificate available to their employees or produce it when requested by the Health and Safety Executive (HSE), they could face a separate £1,000 fine.
What about employees who aren’t full-time?
You will need employers’ liability insurance if you have any kind of employee, whether they are full-time, part-time, temporary, or, in some cases, voluntary.
You may also need this cover if you employ any labour-only contractors or subcontractors. It can be hard to know if you need employers’ liability insurance for this type of work, but essentially if they are treated like an employee, you are likely to need cover.
For example, a contractor – a plumber working for your construction firm, for example – may be regarded as an employee if they work exclusively for you using business equipment or tools you’ve provided, with hours and where they work decided by you.
Are there any exceptions?
As you would expect, you won’t need employers’ liability insurance if you don’t have any employees (or anyone considered an employee).
Most businesses that have employees will need this cover, but there may be some that don’t need it.
For example, you may not need employers’ liability insurance if you employ anyone who is:
- a close relative (spouse, civil partner, sibling, parent, grandparent, child, grandchild, sibling, half-sibling, stepson or stepdaughter), unless you have a limited company, in which case you will need to get insurance even if your employees are family members
- based abroad
Some public organisations, such as health bodies and local authorities, may not need this insurance.
You also may not need employers’ liability insurance for certain independent contractors or freelancers. If a contractor works for many businesses, works remotely and uses their own equipment, for example, you may not need cover.
If you’re uncertain about the status of a contractor or subcontractor and whether you need employers’ liability insurance, it’s always best to get some advice on your situation from your current insurer and ask providers when you’re comparing business insurance policies. It’s important to make sure you have this policy in place should your business require it, to make sure you don’t break the law.
» MORE: Is your business underinsured?
What about other types of insurance?
While other business insurance policies may not be legally required, some businesses may still need to take out other forms of cover.
For example, businesses in certain industries may need professional indemnity insurance to be able to do their work. This may apply to solicitors, consultants, financial advisers, and other businesses that offer some form of knowledge or advice.
Some businesses may also need public liability insurance. Even though it’s not a legal requirement, you may need it to register with certain industry bodies and clients may only work with you if you have this cover.
Even if you don’t technically need business insurance, it’s still worth researching the different insurance products available as insurance can protect your business from a variety of risks.
Taking out insurance now could offer you peace of mind and minimise the financial impact of an accident or unexpected event which affects your business.
You can choose to buy business insurance as a package, including employers’ liability insurance and any other insurance policies that your business needs. This can be simpler and easier to manage than taking out individual policies, and it could work out cheaper too but always make sure to compare before purchasing.
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