What is employers' liability insurance?

Most businesses that employ staff are legally obliged to take out employers' liability insurance, no matter how big or small they are. The policy can cover compensation costs and legal fees if an employee or ex-employee sues the company for injury or illness caused by their work.

Do I need it?

Most employers are required to have at least £5m of cover, although insurers will usually offer £10m as standard. Businesses can be fined up to £2,500 a day if they don't have adequate cover.

While businesses that have contracted employees will usually need employers' liability insurance, some organisations are exempt if they employ close family members unless they are incorporated as limited companies.

How much does it cost?

The cost of employers' liability insurance usually depends on several factors, including the type of business and number of employees.

Most policies for an office-based business are provided on condition that all employees do low risk and non-manual work only and are generally cheaper than for businesses employing manual workers. This means if a business employs staff who do manual work on the premises, for example cleaners or a handyman, they need to confirm this is covered on the policy. If it is not, they will need to get separate cover for those staff members who do manual work

Employers' liability insurance and Covid-19

Now that people are beginning to ease back into the office, it's worth considering what happens if an employee contracts coronavirus at work and makes a claim against their employer. An employers' liability policy will likely cover the legal and compensation costs arising from the claim; however, claims will be assessed individually, and a number of factors will determine whether or not employers' liability cover applies.

For those businesses where employees are working from home, employers need to consider potential claims if an employee suffers mental health issues due to work-related stress, especially as they are perhaps having less day-to-day contact with them.

What should I think about when buying employers' liability insurance?

•           Always be honest - when applying for insurance it is important that you discuss your business risks with your adviser to ensure your coverage is comprehensive.

•           Check the T&Cs - always read the terms and conditions of your insurance policy to make sure your company's needs and requirements are fully covered.

•           Think about the risks – you could be liable for damages worth thousands of pounds if a staff member has an accident and gets injured. While it's important to consider staff welfare, it's also crucial to take into account the potential impact this will have on your business.

Claims case studies

Case study 1

Faulty Christmas tree lights started an electrical fire in the office while an employee was working on the first floor. For security reasons the upstairs windows had bars and she was unable to open them and get out. This meant she was trapped and unfortunately lost her life. The business had employers' liability cover and a claim of £1,000,000 was paid out to the employee's family.

Case study 2

A man entered an estate agent's office and threatened employees with a gun. While no member of staff was physically injured, the employers' liability insurance claim paid out for employees to have counselling.