Your insurance responsibilities

The insurance you're required as an employer to take out

There are a number of types of small business insurance available, including public liability insurance, professional indemnity insurance and employer liability insurance. Which ones you need depends on your business.

What must you be insured against?

Regardless of the size of your company it is essential for any large or small business to buy insurance. If you employ anyone, the law states that you should have Employer’s Liability Compulsory Insurance (ELCI). (It is also a legal requirement to display the certificate.) This will provide compensation to employees if they are injured at work or suffer from a work-related illness. The insurance covers legal costs and compensation due as a result of the claim. By law you must have insurance cover for at least £5m.

The only employers that are exempt from ELCI are some family businesses where employees are all closely related however this does not apply if your business is incorporated as a limited company.

ELCI is an agreement between you and your insurer about the circumstances in which they will pay you if your employees sue you. Unlike other types of small business insurance, ELCI contracts cannot impose exclusions (ie refuse to pay out if you have failed to comply with certain conditions). If one of your employees suffers an accident as a result of the employer’s neglect, the insurance company can not refuse to pay even if :

  • you have not provided reasonable protection to your employees against injury or disease

  • you can not provide certain information to the insurance

  • you have done something they told you not to do (eg admitted the accident was a direct result of your neglect)

  • you have not done something they told you to do (eg reported the accident to them)

  • you have not met your legal obligations

Your insurer can, however, impose conditions on continuing to offer you cover. They may inspect your premises and activities and present you with risk improvements. It is in your interests to comply with these as the uninsured costs of serious accidents could potentially put you out of business. If you do not comply, your insurer may also refuse to continue offering insurance to you.

Other types of insurance:

Public liability insurancePublic liability insurance covers you against any claims made against you or your business by members of the general public.

Professional indemnity insuranceProfessional indemnity insurance covers your business against customer claims that you have made mistakes or been negligent. As there can be a time period between the event and the claim it’s important to ensure your professional indemnity insurance covers you for both events.

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