Employers’ liability insurance is one of the only policies that is actually required by law. Understanding whether or not you need it for your business, though, is a bit complex. To decide if you need it, you have to see if anyone working for you is considered to be an “employee” according to the Employers’ Liability Act of 1969.
Who Is an Employee?
Deciding who fits under this act is perhaps the most complicated part. Generally, you need liability insurance if you’re deducting national insurance and income tax from the money you pay someone. You may also need it if you can control when and where someone works for you. If you’re supplying the work materials and equipment, you may also need it. Additionally, if you keep the profit your workers make, you may need liability insurance.
If those people who work for you don’t fit these categories, you may not be required to carry it. Imagine, for example, you employ people who operate as independent contractors or those you employ don’t have to do the work themselves. In cases like those, you may not need this type of insurance, but it’s best to obtain legal advice before you make that decision.
Even if you are not required to obtain this type of coverage, it still may be a good idea in many cases. Compensation claims can be quite high if they are made against your company. One study found the average claim was £14,300. Could your business afford that if it were to fall in your lap tomorrow? Even without the requirement, it can still benefit your business to carry this coverage. If an employee was injured using equipment that wasn’t properly maintained, you could be sued by that employee and the manufacturer. At the end of the day, that could be quite pricey for your company, and it could be completely prevented by a good employers’ liability insurance policy.
What Does It Cover?
Liability insurance for employers covers any compensation claims an employee makes or any lawsuit presented in court that is the result of injury or damage caused by an employee’s work. For example, if your secretary falls on a cable in the office and breaks her arm, employers’ liability will cover those costs.
How Much Coverage Do You Need?
You are required to have at least £5 million of cover with this type of insurance. Many insurance companies, though, offer quite a bit more than that. For example, many policies come with £10 million of cover as a standard policy, but if you’re concerned about the need for additional insurance, you’ll simply need to chat with an agent to decide exactly how much to get.
If you do not obtain this coverage, and you are required to by law, there is a financial penalty involved. You may have to pay up to £2,500 per day that you remain uncovered by a policy.
Deciding whether employers’ liability cover is right for you is a massive decision for your company, and one for which you may need a bit of legal advice.