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Why Employers’ Liability Insurance is Essential

3 minute read

By Katie Ormsby

As a business owner, it’s essential to consider the welfare of your employees. Alongside ensuring they have a safe working environment, employers’ liability insurance is also necessary to protect your business against potential claims from employees.

Employers’ liability insurance, also known as ELI, covers the costs of compensating employees who suffer illness or injury due to their work. If an employee makes a claim against your business, then employers’ liability insurance can help cover the costs of defending your business in court and paying any compensation awarded to the employee.

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So, what exactly does employers’ liability insurance cover, and who needs it? Let’s get into the details and explore why employers’ liability insurance matters.

What Is Employers’ Liability Insurance?

Employers’ liability insurance is a type of insurance policy that protects businesses against claims made by employees who suffer illness or injury due to their work. The policy provides financial protection to the employer and covers the costs of compensation, legal fees, and other associated expenses.

In most cases, the insurance policy must be taken out by law if a business employs staff. It’s a vital component of any business insurance package since it helps protect the business against potential claims. If a workplace accident happens, then employers’ liability insurance can act as a financial safeguard.1

What Does Employers’ Liability Insurance Cover?

Employers’ liability insurance covers claims made by employees who have suffered an illness or injury due to their work. For example, this can include injuries sustained at the workplace and illnesses caused by exposure to harmful substances or working conditions. The policy can also cover the legal costs of defending a claim made against the business by an employee, including court fees and compensation awarded to the employee.

It’s worth noting that employers’ liability insurance may not cover claims made by contractors, freelancers, or other self-employed individuals who work for the business. In these cases, separate insurance policies or contracts may be necessary to protect the business from potential claims. Business owners should spend some time researching what insurance coverage they need to protect their business from claims.

Are Businesses Required To Have Employers’ Liability Insurance?

In the United Kingdom, it’s a legal requirement for businesses that employ staff to have employers’ liability insurance. The Employers’ Liability (Compulsory Insurance) Act 1969 makes it mandatory for businesses to have a minimum of £5 million in coverage.

Failure to have employers’ liability insurance can result in significant fines for the business. The Health and Safety Executive (HSE) can issue fines of £2,500 for each day that a business does not have the necessary insurance coverage.2

There are a few exceptions to this legal requirement. These may include businesses that only employ family members or independent contractors and some public institutions.3 Take some time to research the requirements for the type of business you run.

What Factors Influence the Cost of Employers’ Liability Insurance?

Several factors can influence the cost of employers’ liability insurance. These factors include the level of coverage you select, the nature of the work, and how many people you employ.4

For example, businesses that operate in high-risk industries, such as construction or manufacturing, may have higher insurance premiums due to the increased likelihood of workplace accidents and injuries.

The number of employees can also affect the cost of employers’ liability insurance. As the number of employees increases, the risk of a claim being made against the business also increases. So, insurance premiums may increase.

Protecting Your Business and Employees With Employers’ Liability Insurance

With the right insurance coverage in place, businesses can operate with the peace of mind that comes with knowing they are protected against potential risks and liabilities. Employers’ liability insurance provides financial protection to businesses and failure to have it can result in significant fines.

Business owners should shop around and compare insurance policies from different providers to ensure they get the right coverage at a reasonable price. It’s also essential to review insurance policies regularly to ensure they continue to meet the needs of the business as it grows and evolves over time.

Katie Ormsby