Do UK contractors need to hold public liability insurance?
If you are new to contracting, you’re probably still trying to fathom which insurances you actually need and which are…
Employer’s liability insurance provides cover for your business if an employee makes a claim for a work-related injury or illness. Many contractors, understandably, question whether they need to hold this type of cover, yet in many cases it is required by law or specifically requested in your contract.
In this guide, we will cover exactly what employers’ liability insurance is, why it’s important, what happens if you don’t have it, what it covers, who needs it, and other commonly asked questions so that you can make the right choices for your contractor business.
Who needs employers’ liability insurance?
This is one of the most frequently asked questions we hear from contractors. In essence, employers’ liability insurance is a legal requirement for any registered limited company in the England, Scotland, Wales, Northern Ireland, the Isle of Man, Jersey, and Guernsey, that employs anyone – whether full-time, part-time, or even someone you hire on a short-term contract – this includes employing family members.
This type of insurance is designed to safeguard your business against legal and compensation claims, from current and former employees, who may have sustained a work-related injury or illness while carrying out their role for you.
There may be times where certain companies are exempt, (see below) however even in those circumstances it may be worthwhile holding a policy for added security and protection. Additionally, some contracts will require you to hold it regardless of whether or not you are exempt.
It’s important to note that if you don’t employ anyone, you are not legally obliged to hold employers’ liability. However, most clients will ask for it to be held regardless.
What happens if I don’t have employers’ liability insurance?
If a claim is made against your business and you don’t hold a valid policy, you could face a fine for up to £2,500 per day, and retroactively for any days you haven’t had the policy in place but should have done.
This has the potential to be an enormous fine – and remember, this could be on top of any compensation pay-out you have to make. You therefore need to ask yourself if your business can afford the consequences by not holding a policy.
What is covered by employers’ liability insurance?
It covers your business for:
- Employee illness or bodily injury – e.g., a slip, trip or fall, an injury caused by inadequate safety equipment and/or training, or an illness caused by exposure to hazardous substances without the provision of suitable protective equipment.
- Legal expenses in the event of a claim – these could be your own (even if you are not at fault) or the claimants if you are ordered to pay them.
Is anyone exempt from holding employers’ liability insurance?
There are a few exemptions to the Employers’ Liability (Compulsory Insurance) Act. These include:
- Public organisations such as the armed forces.
- The NHS and other health service bodies.
- Publicly funded and financed organisations such as state schools.
- Family businesses as long as only close family is employed and your business is not incorporated, for instance; employing your spouse in an admin role exempts your business, but only if you are not operating as a limited company.
- Limited companies where the Director owns at least 50% of the shares and has no other employees;
- Sole traders and partnerships.
How much cover do I need?
You are legally required to hold a minimum indemnity limit of £5 million. However, in line with the industry standard, Kingsbridge’s employers’ liability has a minimum limit of £10 million.
When calculating your indemnity limit take into account risks, liabilities, your claims history, the size of your business, and the number of employees that the policy needs to cover.
What other insurance do employers need?
As well as employers’ liability insurance, most contracts specify for contractors to hold at least professional indemnity insurance and public liability insurance. Kingsbridge offers one comprehensive package that includes all three policies plus directors’ and officers’ liability cover and occupational personal accident cover.
We also offer:
How can Kingsbridge help you?
Kingsbridge’s friendly, expert team can do right by you by giving you a competitive quote for your contractor insurance and ensuring you have the right insurance products for your business. You can get a quote online or contact us to speak to our team.
