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What is Employers’ Liability Insurance? What cover is required?

Posted on Dec 16th, 2018 | Employment law

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Employers’ Liability Insurance often provokes many questions, not least whether or not you actually need it and what coverage is required. We answer the most commonly asked questions.

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Simply put, Employers’ Liability Insurance covers costs that arise from claims made by any of your employees while at work, up to the amount defined in your policy schedule.

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If you’re the sole director of your limited company, own 50% or more of the shares, and have no employees, Employers’ Liability Insurance isn’t required. However, you may find some of your clients require you to have this cover in place before you commence work.

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Whether you’re self-employed as a sole trader or running your own limited company, the law relating to Employers’ Liability Insurance still applies.

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If you fail to have Employers’ Liability Insurance in place when it’s legally required, you’ll end up in hot water with the Health and Safety Executive (HSE). For each day that you fail to have cover, you can be fined £2,500.

You’ll need to make your Employers’ Liability Insurance certificate available to your employees. You can either print it out and display it where your employees work, or make it available to them digitally. You also need to make it available to the HSE, if requested. If you fail to provide your certificate to the HSE, or your employees don’t have easy access to it, you may be hit with a nasty £1,000 fine.

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The HSE requires a minimum cover of £5 million, but most insurance policies provide £10 million cover as standard. All insurance policies from Crunch with Employers’ Liability Insurance have £10 million cover.

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You need to have Employers’ Liability Insurance in place as soon as you start employing people or if you hold less than 50% of the shares in your limited company.

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Ultimately, it doesn’t matter how you refer to a person who works for you or your business. If the HSE deems them to be an employee (for example if you supply their work materials, control where or how they work, or generally treat them like an employee), you’ll need it. If in doubt as to the status of your workforce, get professional advice.

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If you’re a sole trader and employ only close family members (such as a husband, wife, son, daughter, father, or mother), you’re not legally required to have Employers’ Liability Insurance. Crucially, this exception doesn’t apply if you run a limited company – you’ll need Employers’ Liability Insurance regardless of your employees’ relation to you.

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The length you employ people makes no difference to your responsibilities regarding insurance. Even if you only employ someone for a few days, you’ll need cover in place during that time.

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Even if you don’t pay someone for their services, you’re still responsible for their health and safety during their working hours. Employers’ Liability Insurance is therefore required for all unpaid workers.

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As with all insurance costs, the amount you pay depends on various factors, such as the industry your business operates in and how many employees you need to cover. It’s often cheaper when provided as part of a package with other insurance covers, such as public liability and professional indemnity insurance.

If you’re a freelancer, contractor, or small business owner, Crunch can provide business insurance tailored to you. Get an instant online quote today.

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Written by Jake Smith

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